More Than Finances

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5 Common Mistakes Made by Property Investors

Real estate investments seem to be a reliable way of making money in these tough economic times. However, there are number of traps to be wary of in order to protect your investments.

1. Insufficient Research

Often an investor will fail because they purchase the best home on a street that is in an unsuitable location, or in an area that’s run down due to the economic times. It’s important to do your research and choose a wonderful property that’s in a desirable spot. To be able to recognize the flow of your investment, check the listings over the past ten years. This will give you an idea if the market is depressed or if the costs are on the rise. Run a list of the comparables in the area you’re thinking of purchasing also and see how they have fared. For an expert opinion, think about hiring a professional estate agent to help you with the process.

2. Exceeding What You Can Afford

The primary goal of investing is to spend only what you have figured within your budget. Make sure you know your limits and try not to get caught up in the enthusiasm of the projects at hand. Real estate is a long-term investment and you won’t reap the rewards immediately. It takes time for your property values to rise and for them to generate sufficient money. You will also need to factor in any necessary improvements and renovations. When it comes time for making home improvements, be conservative and choose only the projects that will add value to your property first.

3. Not Having an Emergency Plan

An investor can fail in the real estate market if they don’t have an emergency plan ready in case something goes wrong. Today’s economic climate is tough to figure out, so you need to have an emergency plan figured out for a quick evacuation. Be prepared for the unexpected and have a professional expert handy in case you need to get rid of your investment quickly.

4. Don’t Be Impatient 

Unlike other ventures, investment property is a long-term project that you’ll probably make money on once you resell. Plan ahead for renovations and general upkeep and expect these projects to set you back financially at the beginning. It may even be a struggle to meet your mortgage payments on the property at times. Depending on a quick sale will only set you up for financial disaster.

5. Getting Emotionally Attached to the Aesthetics of the Property

This is a major area where investors struggle. They could get emotionally attached to a specific feature or room of the house and fall in love with the investment. It’s definitely a plus to like the home that you are purchasing, but you have to remember that you aren’t going to be living in it. Clear your mind and see the property for its imperfections and the costs that you will have to incur to fix it up. You may love it for its quirkiness and charm, but you need to make sure that you can still rent it out.

Andrew Potter is the resident property blogger for www.myonlineestateagent.com. My Online Estate Agent partners with the leading property websites, providing an unbeatable service for landlords and sellers.

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Take Advantage of the Housing Market to Become a Landlord

One way to build wealth is to become a landlord.  As you gain rental properties, you will have more and more passive income at your disposal, which can help supplement your day job income and increase your cash flow.

Take, for instance, Matt and Jessica who bought a home 10 years ago and have been aggressively paying down their mortgage.  Now, they only owe $50,000.  Despite the market, their home has retained its value, and they have $155,000 in equity in the home.

Since they bought the home 10 years ago, they have also saved aggressively by working side jobs in addition to their day jobs—Matt is a D.J. and Jessica is a photographer.  They have banked all of their side job money and now have quite a large amount.  They have decided to take advantage of the historically low interest rates to buy a bigger home.  However, they won’t be selling their current home; they will instead rent it out and become landlords.

If you are in the market for a new, larger home, there are a variety of home loans available to you, so when preparing to buy a bigger home, you need to determine what mortgage is the best fit for you personally.  Should you take out a 5 year adjustable rate mortgage (ARM) and take the chance that mortgage rates will be lower than they currently are, or should you take out a fixed rate mortgage with the assumption that today’s rates are quite good and locking in those rates would be wise.  Using  mortgage calculators as well as talking to a mortgage broker or loan officer can help you choose the mortgage that is right for you.

With careful planning and the right mortgage, you can find yourself in the enviable position where your tenants pay for your own mortgage payment through their rent payment.  Then, you can continue to grow your own wealth and, if you are interested, buy additional properties.

While being a landlord is sometimes difficult, such as when you have tenants who cannot or will not pay or when your property needs to have expensive repairs, it also has many financial perks.  You can grow your wealth and develop a passive income stream that can give you a good return on your money for years to come.

People enter the rental market through a variety of means.  If you are thinking about becoming a landlord, consider waiting until you plan to move to a larger property.  Then, you can use your former home as your first rental property.  You will know exactly how the property has been taken care of and what condition it is in, so you will not have any surprises as you might if you were buying a new property.

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Cheap Apartment Pitfalls to Watch For

If you see a sign for an apartment that you really like, and the price is affordable, it might not be the deal you imagine it to be. Many apartments out there tout great prices and claim that they have the best deal out there. While the value might not be terrible, the apartment might have a lot to be desired once you actually move in. There could be a disquieting reason the rent is so low.

Bugs

The rent price might be really cheap and the apartment layout is amazing. You sign the lease immediately and can’t wait to move in. However, you quickly realize that there are a million bugs and there is no one to deal with it, or staff doesn’t really care. So, while your rent is really low, you are not sleeping at night because ants are crawling everywhere and the spiders are meeting in the corner of the room for drinks.

Noisy Neighbors

There might be a reason why the rent was so low. The apartment wasn’t rented because it is just so loud. Maybe the neighbor plays music all night long and you can’t sleep. If you live in a city, you could be living in a bad part of town where you hear nothing but gunshots and loud arguments all night long. Certainly, cheap apartments can never compensate for this pitfall.

Poor Landlord

After a few months, you realize you aren’t staying any longer than the lease states you have to. However, your landlord is so cheap you don’t get your security deposit back despite having an immaculate apartment when you leave. While you can take your landlord to court, are you willing to invest that time and money into doing so?

Most landlords are going to come off as nice and appear to be your best friend until you sign your lease. Make sure you take pictures and fill out a condition report so that your landlord doesn’t come up with an excuse to keep your money, or try to evict you for some nonsense reason.

Keep in mind that you should never ever rent an apartment without seeing it first. If the landlord won’t let you see it, do not send any money or agree to take the apartment!

Your landlord might also pull a nice little trick where they don’t pay the mortgage on the house you live in, so you are foreclosed on without any recourse. It would be hard to get your rent back, or at least any of the rent you paid, so you are stuck looking for a new apartment on short notice.

Lease Terms

Most leases are one-year deals, but watch out for special deals that lock in your rent for longer than one year, or will have increases after the first year. This isn’t really bait and switch, but some creative language that makes the deal sound better than it really is. Make sure you are reading your lease and understand what you are signing before you move in.

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Resources To Help You Shop For A Home Online

Nowadays, you can buy almost everything online. Whether its books, clothes, cars, or electronics, the internet has made it easy and convenient to shop from home. So why not buy a home online?

Though you may not be able to just place a home in a virtual shopping cart and checkout, you can perform a detailed search for homes, keep aware of market conditions, and do a lot of research through the internet.

Here are two unique websites that help you do this.
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How To Improve Your Chances Of Getting A Mortgage Loan

If you’re hoping to own the home of your dreams one day, you’ll eventually need to apply for a mortgage. But if you’re concerned about possibly not being able to get a loan, here’s some advice to help increase your chances of getting a mortgage.
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