Posts Tagged ‘real estate investor’
- Floridians pay an average $5,679 per person in state and local taxes
- Residents pay an average $2,584 in state taxes – one of the least amounts nationwide. Only the residents of one other state pay less.
- However, local tax burdens are higher. “Per Capita Local Tax Collections” ranked No. 27 nationally.
- In the balance between state and local taxes, Florida relies more heavily on local revenue than almost all other states and is No. 2 nationwide. Local taxes account for 53.3 percent of the total.
- With property taxes, Florida ranks a solid “average” score – No. 25. The state’s per capita property tax ranking is right at the median – 25th.
- Florida also classifies 38.7 percent of its state and local revenue as non-tax revenue (such as “fees”) – the 7th largest percentage in the nation.
- Florida relies more heavily on transaction taxes, such as general and sales taxes. They make up, 81.5 percent of all state tax collections compared to the national average of 47.2 percent.
- Florida has the highest state and local selective sales (excise) taxes on utilities in the nation. The tax on motor fuels is No. 15; the tax on alcoholic beverages is No. 19.
- Florida’s housing sector produces significant revenue, and the state’s documentary stamp taxes are rising rapidly post-recession. It collected an average of $276 per capita in 2006, $72 in 2009, and $130 per capita in 2016 – the nation’s second-largest doc-tax burden.
- Florida is one of seven states without a personal income tax. The average state relies on personal income taxes for 37.0 percent of its tax revenue.
- Businesses pay 51.7 percent of all Florida state and local taxes – the 12th highest percentage in the nation.
Flipping is when real estate investors buy real estate and then resells them at a profit months down the road. Can you make money doing this? Yes.
Can you make a lot of money doing this? Yes.
But you can also lose everything you own if you make a bad decision….Absolutely!
A renovation can be an overwhelming experience with high stakes. Investors must create an overall vision for the project, gauge its financial feasibility, build a reliable team that includes a Realtor, contractors, lender, accountant, insurance agent, designer or architect, and attorney or Title Company, be highly capitalized, and hope that their assessment of the market is accurate and that the property sells quickly. The longer your cash is tied up and you are paying expenses the less profitable your investment.
Thanks to tighter lending standards you will need plenty of cash, and nerves of steel, to get into flipping. So what do you need to get started?
- First, you need an excellent credit score. Lenders have tightened their requirements for home loans, especially if you want a loan for a high-risk house flip.
- You need CASH! Use the cash for a down payment, so you don’t have to pay private mortgage insurance (PMI) on your second mortgage. You could also take out a home equity line of credit (HELOC), if you qualify. If you have enough in savings, and you manage to find a bargain-priced property, you can buy the property for cash, and take out a small loan or line of credit to pay for the renovations, Realtor fees, and closing costs.
- A great way to get started flipping houses – especially if you have little money – is to form a joint venture with a partner who has money. If you don’t have the money, the joint venture partner will fund the deal while you do all the work. Although you may not get rich on your first deal, you’ll gain something even more valuable – experience.
What Makes a Good Real Estate Investment?
Finding an undervalued property in this market can be a challenge. With foreclosure rates down and bank owned property inventory drying up, there is a shortage of inventory compared to just a year ago. Utilizing real estate professionals will greatly assist you in finding suitable properties.
- Location. Expert flippers can’t stress this enough. Find a home in a desirable neighborhood, or in a city where people want to live. Start by researching local cities and neighborhoods. Look for areas with rising real estate sales, employment growth, and good schools.
- Sound Condition. You don’t want to tear the house down, and start rebuilding it from scratch. Look for structurally sound homes. You may not have the opportunity to have a home inspected, especially if you buy the home at a real estate auction. You need to learn what to look for, or bring someone knowledgeable about building, electric, and plumbing with you to look at the home, to determine if the home is structurally sound.
- The Right Fixes. A home with old carpet and wallpaper may be easy, and cheap, to update. Other home repairs to tackle might include, replacing outdated kitchen and bathrooms, and replacing windows and doors. A house that has mold, needs a roof replacement, or needs rewiring, requires some serious time and cash to update and sell. Make sure you know which updates and repairs you can afford to fix, which repairs you can’t afford, and which home improvements will increase the selling price of the house. When you estimate the cost of any job, experts advise that you add 20% to the final estimate. Why? It’s always going to cost more than you think it will.
- Value. Make sure the price of the home is below its value in the local market. Otherwise, you will not make money. The worst house in a great neighborhood has nowhere to go but up in value, due to the value of the other homes in the area. Know which home improvements increase the home’s value. Focus on these projects first. Home improvements that increase the value of a home might include upgrading kitchen appliances, repainting the home’s exteriors, installing additional closet storage space, upgrading the deck, replacing windows and doors.
- Before you make an offer, make sure you know the uppermost price you can pay for a house, and still make a profit. This includes your estimate for repairs, interest, and taxes. Remember to pad your estimate by 20%. If the homeowner or bank won’t sell to you for this price, walk away. It’s better to keep looking, than to risk going broke from a bad investment.
Now Get Working
- Make sure you know which home improvement projects you can complete quickly and successfully, and which projects will need contractors.
- You need permits before you start remodeling. Not having the right permits, or not correctly displaying permits, can cause serious delays, and fines, from city inspectors. Make sure to apply for permits as soon as the sale is final. It’s also helpful to make a timeline for projects, with associated deadlines, and the budget listed for each project. This helps you, and your contractors, get renovations done quickly, and within budget.
Relist and Sell
- Many flippers end up listing their homes with a Realtor. Realtors eat and sleep real estate, have access to buyers, and can list your house in the MLS database. They also know the current market fluctuations, and have the skills and network to get you the best price quickly.
- Without a doubt, flipping homes offer great risks, and great rewards. A house flipper must be prepared for the possibility that the home won’t sell right away. House flippers also have to make tough decisions, like whether to accept an offer that is less than they wanted, but still for a profit. If you can handle all of the ups and downs, and you have the time and enthusiasm for fixing up and selling homes, then house flipping might be right for you.
Always know who the real estate agent you are working with represents. If they are the Listing Agent they represent the Seller, a Transactional Agent works for their personal benefit and even though an agent will put you in the car and drive you around and are not the listing agent, in most states they are Sub-agents for the Seller and work for the seller. It is most advisable for buyers to only work with Exclusive Buyer Agents (EBAs). If you find that you are at an open house or have called an agent and they are not an EBA…you’re your tongue. What buyers may innocently say in the presence of a Seller, Listing Agent, Transactional Agent, or Seller’s Sub-agent can be used against them during a negotiation.
While it may be tempting for buyers to say what’s on their mind during their home search, you should consider yourself in a poker game and keep your cards close to your chest and your comments to yourself. There are some things home buyers should never say on the fly.
Others may be listening. Listing agents, seller and neighbors all have motives to keep tabs on the situation — or there could be even be a camera or recording device planted somewhere. In the age of smart home security you can never be too sure.
Those off-the-cuff comments made while moving from room to room could be used against you.
Here are some obvious comments home buyers should never say when shopping for a home:
‘I love it; it’s perfect!’
That feedback goes straight to the seller.
When the less-than-full-price offer comes in and the buyer requests all sorts of concessions, how will the seller be inclined to respond?
‘That (decor, furniture, wall color) is awful!’
What were they thinking?
So maybe the sellers’ tastes are not what the buyer would pick, but that doesn’t make their choices wrong. If these comments get back to the sellers, their desire to be cooperative when offer time comes in my be less than enthusiastic.
‘This home is way overpriced’
Be careful with that statement.
While this is a common buyer thought, what happens if this house ends up being the best option? When the listing agent or seller sees the buyer’s name on an offer, they immediately tart off in a defensive position. If is is truly overpriced your Exclusive Buyer Agent should provide a comprehensive analysis during the negotiation to make this point.
‘I can afford to spend up to X’
While it’s certainly a good idea for prospective buyers to find out just how much they can afford, they should keep that information strictly between them and their Exclusive Buyer Agent. You would be surprised by the number of deals that end of at the top of your affordability range because you disclosed this to the agent that is driving you around. Insist that they develop a Comparative Market Analysis and pay no more than market value for any property regardless if you can afford to pay more. Most real estate agents have a duty to get the highest price offer for the Seller or want to get the highest price offer to get the most commission. The only type of agent that has a fiduciary responsibility to the Buyer is an Exclusive Buyer Agent, even an Accredited Buyer Agent will either be a transactional agent or sub-agent of the Seller if they are not the listing agent as well.
“Why is the Seller moving?”
This is a personal question that’s best not asked by a buyer, it will more often then not result in an evasive answer or a lie.
Let the buyer’s agent position that query with the listing agent in a diplomatic way to glean information about the situation at hand.
‘What are the neighbors like?’
Talk about putting someone on the spot. Listing agents likely have no idea — they don’t live in the neighborhood 24/7, and it would they cannot discuss race, religion, sexual orientation, etc. When cornered, is the seller likely to divulge?
“There’s a Mrs. Kravitz across the street and a curmudgeon next door? And by the way, the teenager that lives on the other side of the house? His band starts warming up in the garage about 11 p.m. on Thursday nights.”Hardly. These people are trying to sell their house. It’s all wonderful. Buyers have to assess the neighbors on their own. Visit the neighborhood and different times of the day and on the weekends to get a sense of the neighborhood.
‘Will the seller take X price?’
Negotiations are best left to agents with a written document from which to work. No Agent or Seller will be inclined to negotiate in good faith without a written offer and Proof of Funds or a pre-qualification letter that demonstrates your ability to buy the property.
Although it’s OK to be candid with your own agent and those you trust, only do so when you are not within earshot of anyone in the seller’s camp. That includes those curbside chats as you are wrapping up the showing near your car.
Be engaged but conservative in the information you share and how you react to homes you see, even if you have a real interest. You can jump for joy when you are with your agent writing the perfect offer.
The Federal Reserve kept the benchmark rate unchanged on September 21st, in a divided vote that alludes to the possibility of a hike before the end of the year.
“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the Federal Open Market Committee (FOMC) released in statement. “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
“Our decision does not reflect a lack of confidence in the economy,” Fed Chair Janet Yellen said in a press conference, later adding, “We’re generally pleased with how the U.S. economy is doing.”Today’s action was largely expected by analysts as policymakers stood fast this summer, despite initially forecasting four hikes this year. The federal funds rate informs the trajectory of mortgage rates, which remain at historic lows.
Perhaps no sector has benefited more from ultra-low rates than housing, which was devastated by the real estate crash. Home sales are expected to total about 5.7 million this year, up from 5.4 million in 2014 and 4.6 million in 2011. The recovery can at least partly be traced to 30-year fixed mortgage rates that remain below 4%, down from about 6% in 2008, keeping borrowing costs low for buyers.
But today’s housing market is supported by far more than low mortgage rates — namely steady job and economic growth. What’s more, 30-year mortgages are priced off 10-year Treasury note yields, which do rise as short-term rates climb, but not as steeply.
Doug Duncan, chief economist of Fannie Mae, the giant government-sponsored funder of mortgages, expects this week’s Fed hike of a quarter of a percentage point to have virtually no immediate impact on Treasury or mortgage rates, noting markets already have priced in the move. Assuming the Fed raises its rate by a percentage point over the next year, Duncan expects 30-year mortgage rates to drift from 3.9% to 4.1% during the period. That would boost the monthly cost of a typical $225,000 mortgage by $26 to $1,454 — not enough to deter most buyers.
Adjustable-rate mortgages, many of which are modified annually, could increase about twice as rapidly, by about a half a percentage point. Yet as long as job growth and aggregate U.S. incomes increase proportionally, Duncan expects any market impact to be modest. A far bigger restraint on home sales, he says, is a limited supply that should push up prices by nearly 5% both this year and in 2016. As a result, Duncan expects home sales to increase 4% in 2016, down from 8% this year, with higher rates holding back 1% to 2% of deals.
“As long as the rate rise is gradual, I don’t see it as a hugely important factor,” he says.
What to do before closing:
- You can still be denied for a mortgage loan, even after you’ve been pre-approved by the lender. The pre-approval is not a commitment or guarantee. You’ve been conditionally qualified for loan. But you need to stay qualified all the way up to the closing. The less your financial situation changes, the better.
- If you withdraw or transfer funds for any reason before closing, your lender will probably ask for a written explanation. They will also want to see a record of the transaction, such as your bank statements.
- Make sure you have a home owners insurance policy in place. Your lender will require this. They might even require you to pay the first year’s premium in advance, by setting up an escrow account. The lender may contact your insurance agent before closing day, to verify the policy and coverage amount.
- If you make any large deposits into your account, tell your lender about it. It will only help your cause, as far as mortgage approval goes. Provide any documents you have relating to the deposit.
What to avoid before closing day:
- Don’t spend a lot of money. Implement a self-imposed “spending freeze,” as much as possible. You obviously have to buy groceries, gas for your car, and other necessities. But don’t spend anything beyond that. Keep things as stable as possible until after you close on the home.
- It’s best to avoid any major purchases during this period. Your lender might have certain cash-reserve requirements for the loan. So a major reduction in assets could hurt your chances of getting the final approval.
- Don’t open any new credit lines, such as credit cards. The same goes for buying a car, applying for a store credit card, etc. These things will change your debt ratio, which could cause problems with your final approval. Mortgage lenders hate surprises.
- Don’t switch jobs before closing, unless it’s completely unavoidable. A new job usually brings a change in income, as well. If your income goes down, it will alter your debt-to-income ratio in a bad way. A change in employment will also require a lot of paperwork changes. Some lenders will verify your employment again, just before closing day.
Florida’s housing market reported higher median prices and fewer days to a contract in June, according to the latest housing data released by Florida Realtors®. Closed sales of single-family homes statewide totaled 27,086 last month – slightly higher (0.4%) than the June 2015 level of 26,973 closed sales.
“Florida’s housing market is experiencing tight supply and pent-up demand. That is affecting the pace of sales and putting pressure on statewide median prices. Florida’s economic growth, rising jobs outlook and acclaimed quality of life continue to draw new residents eager to call the Sunshine State home.
Home sellers continued to get more of their original asking price at the closing table in June: Sellers of existing single-family homes received 96.3 percent (median percentage) of their original listing price, while those selling townhouse-condo properties received 94.6 percent (median percentage).
The statewide median sales price for single-family existing homes last month was $225,000, up 10.8 percent from the previous year, according to data from Florida Realtors research department in partnership with local Realtor boards/associations. The statewide median price for townhouse-condo properties in June was $164,000, up 8.6 percent over the year-ago figure.
In June, statewide median sales prices for both single-family homes and townhouse-condo properties rose year-over-year for the 55th month in a row. According to the National Association of Realtors®(NAR), the national median sales price for existing single-family homes in May 2016 was $241,000, up 4.6 percent from the previous year the national median existing condo price was $229,600. In California, the statewide median sales price for single-family existing homes in May was $518,760; in Massachusetts, it was $353,000; in Maryland, it was $282,257; and in New York, it was $212,500.
Short sales for townhouse-condo properties declined 43.2 percent while short sales for single-family homes dropped 37.2 percent. Closed sales may occur from 30- to 90-plus days after sales contracts are written.
“Much of 2016’s slowdown in sales growth is due to the dwindling inventory of distressed properties throughout Florida,” said Florida Realtors® Chief Economist Brad O’Connor. “In June of last year, about 20 percent of sales across all property types were of the distressed variety. This June, by contrast, only 10 percent of sales were distressed. These declines are not due a lack of demand, but rather, a clear lack of supply. Florida’s distressed properties continue to slowly but surely work their way through the pipeline.
“If distressed properties are taken out of the equation, sales growth among non-distressed properties – the traditional market – remains quite strong. Non-distressed single-family home sales were up 13 percent year-over-year in June, while non-distressed sales of townhouses and condos rose by 7.6 percent.”
Inventory was at a 4.3-months’ supply in June for single-family homes and at a 6-months’ supply for townhouse-condo properties, according to Florida Realtors.
When you buy a fixer-upper residence for either personal or investment reasons, you need to have a thorough understanding of all of the potential related additional costs to determine if it is a worthwhile investment.
The following analysis in introspection will assist you in determining much you can afford, how much to offer, and whether a fixer-upper house is right for you.
Decide what you can do or want to do yourself
TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult renovation job that you don’t know how to do will take longer than you think and can lead to less-than-professional results.
Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
Do you really have the time and desire to do it? Can you take time off work to renovate? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?
Price the cost of repairs and remodeling before you make an offer
If you are using a professional get several estimates on the work you want done by licensed and insured contractors.
If you’re doing the work yourself, price the supplies.
Either way, tack on 10% to 20% to cover unforeseen problems that WILL arise when you start to open walls, remove windows, install electric and plumbing, etc.
Check permit costs
Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home. Also check to ensure that there was no other non-permitted work done to the home. If you get permits that chance that this work will be found and cited is likely.
Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
Factor the time,costs, and additional requirements of permits into your plans.
Double check pricing on structural work
If your renovation plans include major structural work, hire a structural engineer to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full scope of the work required.
Get written estimates for repairs before you commit to buying a home with structural issues.
Don’t purchase a home that needs major structural work unless:
You’re getting it at a steep discount
You’re sure you’ve uncovered the extent of the problem
You know the problem can be fixed
Check the cost of financing
Be sure you have enough money for a down payment, closing costs, and repairs without draining your savings.
If you are planning to fund the repairs with a home equity or home improvement loan:
Get yourself pre-approved for both loans before you make an offer.
Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
Include inspection contingencies in your offer
Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections such as whole home inspection, radon, mold, lead-based paint, chinese drywall, septic, well and pest.
Lastly, don’t pay more than fair-market value
Have your EXCLUSIVE BUYER AGENT develop an comparative market analysis that makes adjustments for all of the issues involving the property, location, condition, time value of money, et. al. A transactional broker or listing agent is interested in selling the property for the highest price and is not working in a buyer’s best interest. Always use an EBA when purchasing real estate.