5 Financial Terms Every Real Estate Investor Should Know

5 Financial Terms Every Real Estate Investor Should KnowThe success of your real estate ventures depend on your ability to navigate the financial world. Learn these terms to make it easier to understand what’s going on with your real estate investments.

Cash Flow

Contrary to popular belief, cash flow isn’t just the amount of liquid assets you have available. Your cash and unused lines of credit are an essential indicator of your ability to complete projects and pay the cost of ongoing operations. However, these factors don’t tell the whole financial story.

Your actual cash flow is the difference between your gross income and your financial obligations. You can have a large cash reserve but still have a negative cash flow if you aren’t making enough to cover your obligations.

Gross Yield

When evaluating potential properties, it’s helpful to understand the gross yield. To calculate gross yield, divide the annual income you expect the property to produce by the property’s price. This number comes in handy for comparing properties and narrowing down your options.

Amortization

Lending institutions offer a variety of loan structures to fit your goals and financial standing. An amortized loan features a set amount of interest. This amount is integrated into each monthly payment. That means that borrowers are paying on the loan’s principal and paying down their interest liabilities from the very first payment.

Amortization is an excellent way to quickly build equity. This enables real estate investors to use existing properties to fund other projects without having to sell off their holdings.

Carrying Costs

Flippers and other short-term real estate investors need to keep a close eye on their carrying costs. These are all the expenses incurred after the initial purchase and before the property is sold for profit. Carrying costs include mortgage and interest payments, utility bills, taxes, and insurance.

The best way to limit carrying costs is to flip your property as quickly as possible. However, sudden changes in the market, illness, and other unexpected factors can prolong your need to make monthly payments. In this event, investors should carefully monitor their cash flow to ensure they don’t end up losing their entire investment.

Double Close

Wholesale home buyers often already have an exit strategy before signing on new properties. In this case, a double closing allows the wholesaler to purchase the property and sell it to a new buyer in a single transaction. This is also sometimes called a back-to-back closing.

Knowing these terms will make it easier for you to manage the financial details of your real estate investments. And partnering with a trusted real estate professional will make it easier for you to find just the right investment property. 

11 Simple Ways To Save Money Toward The Purchase Of Your New Home

11 Simple Ways To Save Money Toward The Purchase Of Your New HomeIf you find it difficult to make ends meet, these tips will help you save money in ways that are easy to do and create substantial savings over time.

Declutter

Get rid of stuff you do use or need by having a garage or yard sale or by putting things for sale on eBay or Craigslist.

Make Your Own Coffee

Do you really want to make that billionaire richer by buying coffee for $5+ a cup? Make your own gourmet coffee that costs around 50 cents per cup for the same thing.

Bring Your Own Lunch

Making your lunch the night before to take to work the next day will give you more time to enjoy lunch. You will save the money that is wasted when driving to fast-food restaurants or going to pricey lunch places.

Grow Some Food

Everyone should have a garden, even if it is only a window garden for herbs. If you have some room for pots, you can grow tomatoes and other vegetables. If you have a back yard or a front yard you can grow tons of stuff.

Buy In Bulk And Use Coupons

For the things that you use on a regular basis, stock up when the items are on sale. Buy things at discount stores. Buy bulk things like rice and pasta at wholesale prices in co-ops. Coupon clipping is a hobby that pays for itself in savings. Just be careful not to buy things you do not really need or use.

Change Home Lighting

If you have not yet changed out all your incandescent bulbs to compact fluorescent bulbs, what have you been doing? Change those bubs right away because you are burning up money on wasteful lights.

Install Smart Home Technology

Making a home run with more energy-efficiency is reduces your bills and helps the planet too. Smart home technology monitors comfort zones and turns things off when they are not needed.

Cut The Cable

An expensive monthly bill for cable TV is something many can do without. There are plenty of less expensive alternatives and tons of free content to view online.

Make A Change Jar

Every time you come home, put all the change you have in a change jar. You will be surprised how much money builds up over time and you will hardly even notice it is missing.

Walk Instead Of Drive

Do you have to drive your car everywhere? Try walking short distances instead. Not only will you save money on gas; walking may improve your health.

DIY Projects

Instead of paying others to do simple jobs around the house, do them yourself. There are plenty of do-it-yourself (DIY) guides on YouTube that show how to do just about anything. You will save the expensive labor cost for simple home repairs that can be up to $75 per hour.

Are you inspired? OK. Put some of these ideas into action. Ready, set, save!

Your trusted real estate professional is a skilled negotiator. Be sure to utilize this savvy resource as soon as you are considering a new home purchase.

Case-Shiller: December Home Price Growth Slowest in 4 Years

Case-Shiller: December Home Price Growth Slowest in 4 YearsCase-Shiller Home Price Indices reported the slowest rate of U.S. home price growth since November 2014. According to the 20-City Home Price Index, Home prices grew by 4.20 percent year-over-year and were 0.20 percent higher in December as compared to November. The 20-City Home Price Index fell short of analysts’ expected gain of 4.80 percent year-over-year. Case-Shiller’s National Home Price Index reported home prices increased 4.70 percent in the fourth quarter of 2018.

While home price growth is sluggish, home prices continued to rise faster than wages. This creates obstacles to affordability for many would-be home buyers. Fears about rising mortgage rates and inflation, also concerned would-be home buyers seeking affordable homes.

20-City Home Price Index: Home Price Growth Rose In Only 5 Metro Areas

Las Vegas, Nevada led in home price growth for December with a year-over-year increase of 11.40 percent. Phoenix, Arizona home prices rose 8 percent year-over-year, and Atlanta, Georgia home prices increased by 5.90 percent. Home prices in west coast cities including  San Francisco, California and Seattle, Washington grew at a slower pace than in prior years, which could indicate that high-demand metro areas are approaching peak home prices.

December home price growth surpassed November readings in five cities tracked in the 20-City Index. Three cities reported no change in month-to-month home prices growth. David M. Blitzer, Chair of the S&P Dow Jones Index Committee, acknowledged that year-over-year home prices continued to fall despite the prior assertion that housing markets were not approaching “bubble” conditions seen in the Great Recession.  

Serious Headwinds Face Prospective Home Buyers

According to data compiled by the National Association of Realtors®, 27 percent of prospective home buyers surveyed at the end of 2017 believed that they would face fewer challenges to finding and buying a home in 2018. Prospective buyers surveyed in late 2018 who planned to buy within the next year decreased from 24 percent to 13 percent. Combined impacts of high home prices, potential increases in mortgage rates and strict mortgage requirements discouraged some would-be buyers, but whether this is a short or long-term trend will depend on factors including inflation, wage growth and inventories of homes for sale.

Market conditions can vary by location. Please be sure to consult with your trusted real estate professional to find out about market specifics in your area.

Sound Advice From Successful Home Sellers

Sound Advice From Successful Home SellersThe real estate market and all the things involved in selling a home can seem complicated, and it can be very hard to know which tips to trust. While there’s plenty of great advice to go around from many knowledgeable sources, here are some of the best tips from home sellers who have made a successful sale.

Research Your Local Agents

When considering an agent that will meet your home-selling needs, it can be tempting to go with someone familiar or recommended through a friend who seems like a safe bet. However, it’s important to do some of your own research. Create a list of agents you’re impressed by and take note of their sales and agent fees. Keep in mind that you may want to lean towards an agent who has expertise in your neighborhood.

Get A Second Opinion On Price

Before you have an agent appraise the value of your home, it’s worthwhile to do some research on your end to determine the approximate value of your property. Once you’ve arrived at a figure, bring in the agents you’ve selected to appraise the value of your property. If one price is significantly higher than the other, it may be a sign that an agent is trying to win over your business. Most agents are in tune with the current market and should be able to guide you toward the most appropriate market price. 

Be House Ready At All Times

Having potential buyers view your home will certainly make the idea of selling it real, so make sure that it is ready for viewing at any time. If a potential buyer cannot view your property or has to work around your schedule constantly to arrange viewings, there’s a pretty good chance that you may lose out on some good home offers. Instead of missing out, provide a set of keys to your real estate agent so they can show people around your home when you’re not around. This should automatically increase the likelihood of an offer on your home.

Heading into the real estate market can be a matter of trepidation if you’re not sure what to do, but by doing some research and being prepared you’ll increase your chances of success. As soon as you begin to consider putting your home on the market, be sure to contact your trusted real estate professionals for more information and expert guidance.

FOMC Meeting Minutes: Why Fed’s Rate Policy Reversed Course

FOMC Meeting Minutes: Why Fed’s Rate Policy Reversed CourseAfter raising the target range for the federal funds rate in 2018, the Fed’s Federal Open Market Committee did not raise the Central Bank’s key interest rate at its meeting of January 29 and 30. While Committee members did not raise the Fed’s key rate, members were divided on the interest rate decision.

FOMC Members Divided On Interest Rate Decision

Minutes of January’s FOMC meeting indicated that member viewpoints varied about how the Fed should deal with the Fed’s target interest rate range. One group said that interest rate increases may be necessary if inflation increases above the Federal Reserve’s baseline forecast.

Other FOMC members supported raising the Fed’s interest rate range later in 2019 if economic conditions move as expected. Overall, FOMC members said that there were “few risks” in the Committee’s current position of patience, but they were open to reassessing that position according to how economic conditions change.

FOMC Cites Reasons For Halting Rate Increases

Committee members provided several reasons for reversing their 2018 policy of consistent rate hikes including declining economic conditions since early 2018. Global and domestic economic conditions slowed; deteriorating conditions were supported by lower readings on consumer and business sentiment. Federal government policies including the partial government shutdown and then-current trade policy contributed to the deteriorating economic outlook in late 2018.

Ongoing influences driving FOMC monetary policy decisions include the Fed’s mandate for achieving maximum employment, stable prices and moderate long-term interest rates. Because short-term data change frequently, Fed monetary policy reflects long-term goals, medium-term outlook and the Committee’s risk assessments in multiple financial and economic sectors. The Committee said that long-term inflation of two percent indicates stable pricing as required by federal mandate; any prolonged deviation above or below the two percent reading would concern Committee members.

FOMC indicated progress with its maximum employment mandate by changing its long-run unemployment outlook from 4.60 percent to 4.40 percent, which suggests a strong outlook for job markets. Fourth quarter Gross Domestic Product was described as “solid”. The meeting minutes indicated that some data typically used by Committee members was limited by the government shutdown.

 

5 Ways Bridge Loans Help Real Estate Investors Increase Profits

5 Ways Bridge Loans Help Real Estate Investors Increase ProfitsBridge loans, which are also commonly referred to as interim financing, gap financing or swing loans, help a motivated home buyer to secure financing before their home or investment property sells. Lenders can usually modify these flexible loans to accommodate a person’s unique needs.

Current real estate market conditions allow savvy investors to make big profits as long as they can move quickly on good opportunities. Low inventories of existing homes and slower than normal construction developments have combined to drive the median home price across the US to $223,900. This represents a 7.6% national average increase through 2018. Market experts expect prices to rise by another 6.3% over the next 12 months which may present very good opportunities for home buyers. 

Bridge loans are a short-term funding solution with some unique features.

  • They usually include payback terms between 2 months to 1 year.
  • Most bridge loan options gain approval in about 15 days.
  • May receive up to 70% of the property’s value in the loan.

Bridge loans are a tool real estate investors can use to increase their holdings in this hot market. How can these funds be used to help you make more money from your properties?

  • When prime properties come up for sale, investors need to be ready to take advantage. If most of your cash is already tied up in other properties, a bridge loan is a perfect way to get the quick cash you need to win the bid.
  • While a property is up for sale, investors can use bridge loans to continue financing new projects. When the sale is complete, the funds can be used to pay off the bridge loan.
  • Hard money loans are a popular option for real estate investors who can’t wait for the normal bank loan process. However, these funds usually come with higher interest rates. Bridge loans are a lower cost alternative, as lenders generally charge less interest for these accounts.
  • Not sure what you’re going to do with your new property? If you wait too long to make your decision, chances are good that the property will be gone. Use a flexible bridge loan to secure your property. If your plans change, it’s simple to convert the funds into a more conventional loan structure.
  • For flippers who buy properties, perform renovations, and put the properties back up for sale for a profit can use bridge loans to quickly increase their holdings without sacrificing the liquid assets they need for material, labors, and other renovation costs.

In order to qualify for these funds, investors need to prove that they can afford double mortgage payments, present a clear plan on how they intend to pay for the loan (either through resale or refinance), and have a property that can be used as collateral with at least 20% existing equity.

When used as part of an overall investment plan, bridge loans help real estate investors buy more properties, which can mean more money in their pockets. Call your trusted home mortgage professional to discuss bridge loan and other financing options that best suit your personal situation. Most importantly, be sure to utilize the skillset of your trusted real estate professional to find ideal investment properties in your area. 

 

 

The 2019 Housing Market, While Still Risky, Isn’t All Bad for Buyers

The 2019 Housing Market, While Still Risky, Isn't All Bad for BuyersMany new buyers start looking for homes in the spring. The question in 2019 is whether buyers can afford available inventory or want to buy given changes to the tax code and increase in natural disasters. 

Interest Rates

The 30-year-fixed interest rates have been trending lower recently. This reduction in interest rates, coupled with a slowdown in the resale housing market, is working in the buyer’s favor in some areas. Talk with your trusted real estate professional and mortgage lender to get the specifics for your area and situation. 

Affordability

Inventories of available homes are on the rise, but still out of reach for many Millennials and other first-time buyers. This has been the case for the past five years. One of the biggest factors some buyers second guess in a home purchase is the commission fees paid to real estate agents. Remember, the real estate commission is paid for by the seller of the home, not the buyer.

With advances in technology, the role of the real estate agent is changing. Many customers think they might be able to their own home online. However, agents still have valuable expertise in individual markets which may lead to a more competitive sales process. They also have helpful experience with the closing process which can significantly lower the anxiety throughout the home buying process.

Tax Code Changes

The 2018 tax code changes have big implications for current and prospective homeowners. The cutoff on home mortgage interest deductions dropped from $1 million to $750,000, and there’s a new $10,000 cap on state and local tax deductions.

It may take a few years for the full impact to play out. However, it could mean an unfavorable combination of higher taxes, higher interest rates and higher prices. One favorable solution to this trifecta is new home construction. An increase in the number of homes could help to bring down housing costs, but zoning laws hinder a fast ramp up in many areas.

Hurricanes And Other Natural Disasters

In 2017, Hurricane Harvey decimated the Houston area and revealed a lack of adequate coverage for many homes. This should serve as a wakeup call since natural disasters seem to be on the rise. 

New buyers are more concerned with what the interests rate will be and whether they can afford the down payment. Many don’t even ask if the property is in a flood zone. That may change if the streak of hurricanes, floods, wildfires and other natural disaster events continues.

Even with all of these considerations, 2019 continues to look like a great time to invest in a new home. Contact your trusted real estate professional to discuss these issues and how they might affect your local area and personal financial situation.

 

Garage Organization Ideas For Your New Home

Garage Organization Ideas For Your New HomeNow that you have a beautiful new home with a garage, the fun of organizing can begin. When your garage is well organized, everything is much easier. You can get home projects finished faster, get out the door quicker and better enjoy all your sporting activities.

Here are some tips to organize your new garage. 

Make Use Of The Walls

A lot of homeowners overlook the wall space when organizing the garage. If your garage has exposed studs, this is actually a benefit in terms of storage space. You can easily create shallow shelves in between the studs using 2 x 4 and shelf brackets. Use these shelves to store smaller items that tend to get lost on larger shelves. You can also create an effective space for hanging garden tools. Screw extra large hooks onto the outside edge of one of the 2 x 4s. Hang brooms, rakes and shovels from the hooks.

Utilize The Ceiling

You can also utilize the back area of the ceiling, beyond the area where the garage door stops when it’s raised. Install hanging systems that you can source from a local hardware store. You’ll be able to hang things like bicycles, skis, kayaks and more. Some homeowners even hang small lawnmowers and spreaders during off-season.

Invest In A Workbench

Even if you don’t do carpentry, a garage workbench is a useful part of an organized garage. This is the place where you can do small repairs on household items or add to your garage organizational systems. You’re more likely to repair an item when it’s sitting on your workbench and you have all the needed parts within reach. Install some smaller clear storage drawer units above the workbench to hold screws, nails and nuts and bolts in various sizes.

Hang A Pegboard

A pegboard provides a central place for your garage tools. Hang the pegboard on the wall within reach of your workbench. Outline the spaces on the pegboard for hammers and screwdrivers so they always get put back where they belong.

It’s never fun to have to endlessly search every time you need something from the garage. These garage organization ideas will make your new home and garage even more enjoyable.

Your trusted real estate agent is a great resource for information about organizing and staging your home in a way that will appeal to buyers. If you are interested in putting your home on the market, be sure to set up an appointment as soon as possible.

5 Simple Tips To Make Your Home Showings Easier

5 Simple Tips To Make Your Home Showings EasierYour real estate agent will likely give you 24 hours’ notice before bringing over interested buyers to see your home. Sometimes eager buyers may request less of an advance, or even ask for a last minute showing.

Since you’re eager to be accommodating, you may agree to consider such requests. Whether you have 24 hours to prepare for a showing or 15 minutes, these tips will make showings easier for your family.

Keep The Family Pet Carrier By The Door

Real estate agents advise not leaving your family pet at home during showings. Make it easy to bring along Fido or Fluffy by keeping their carrier right by the door. You’ll be able to quickly place him in the carrier and carry him out to the car with you.

Use Under-Bed Storage

The one place homebuyers won’t look is under your bed. Equip each bedroom with a large under-bed storage container; get the kind with wheels if possible. When you receive notice of a showing, just place any loose odds and ends, clothing, magazines, etc. into the tote and hide it under the bed. 

Have Extra Laundry Baskets On Hand

Invest in two or three extra laundry baskets and keep them near the door. When you have to leave for a showing, have each family member scour the kitchen and living room for things that are out of place. Fill the baskets and just bring them with you in the car.

Stock The Kitchen With Cleanup Supplies

The kitchen is the biggest challenge with showings. It’s both the place that gets messiest and the room that can sell your home. Get it spotless in a jiffy with popup wipes. Make it a habit to clean the kitchen immediately after meals, including sweeping the floor. Consider using paper plates to dine on while your home is listed. Keep a scented jar candle in the kitchen that you can light to mask odors.

Make The Car Comfortable

Your family will likely take a drive or go to a movie while the house is being shown. Stock it with a few snacks and bottles of water as well as any medication that a family member may need.

These tips will make house showings much easier no matter how large your house is, or how many family members you have. And one day, you just might return to find that you have a great offer on your house!

Your trusted real estate agent is a key partner in your successful home sale! 

3 Ways To Help Your Kids Deal With The Move

3 Ways To Help Your Kids Deal With The MoveKids of all ages often have a hard time dealing with moving. They may not be able to understand why the family can’t stay in the same place forever. Even with explanations, children often can’t readily envision how amazing the new place will be.

Here are some ideas for helping your kids deal with the move.

1. Make It Easy To Stay In Touch

For a lot of kids, a big sore spot with moving is having to say goodbye to friends and schoolmates. They may even feel like you’re intentionally wresting them away from their friends. To demonstrate how much you understand the sacrifice, make a gift of a cute set of note cards, stamps included. Even if your child chooses to text or email old friends instead of write, they’ll appreciate your gesture.

2. Visit The New Community

If possible, bring your kids to visit the new neighborhood where you’ll be moving. Encourage positive anticipation by signing them up for things like a library card, pool membership or a community event such as an Easter egg hunt, relay race or something similar. Consider enrolling them in a fun local class such as pottery, horseback riding, or something else they would enjoy. This helps your kids to focus on the upcoming activities instead of leaving their friends behind.

3. Strive To Keep Old Routines

When you’re busy packing and readying for the big move, old routines often fall by the wayside. But children need routines to feel safe. Strive to keep as many old routines as possible in the preliminary days and weeks before the big move. For example, if Wednesday is always family game night, stick to the plan. Your kids will feel more secure knowing that some things will stay the same, even in a new location.

Above all, make the time to listen. Your child might have concerns that you hadn’t thought of, like having to give up their dog or cat in order to move to the new house. Don’t worry, though. Kids tend to adjust very well to new situations. With your support and a few tips like the ones mentioned above, your children will make a happy transition to your new home.

A trusted real estate agent can be a wonderful resource who can point you toward family activities in the area of your new home. Be sure to make contact as soon as you are ready to start your new home search.