Home Buying Tips: Part 2

In continuation from last week, today’s blog will be tips for the home buying process. Let’s talk about how to find the right home for you!

When looking for a place to live, it is important to consider the community. You should pick a community that corresponds to your family’s needs. Do you have children? If yes, you would probably want to live in a good school district. How close to the freeway or public transportation do you want to be? Do you want to live in a busy area or a more quiet setting? These are the types of questions you need to ask yourself. When you are considering a neighborhood, take a look around it and talk to the people who live there. You will be surprised how much useful information they can divulge.

Eventually, you will find a home you like and schedule a showing. When you are walking through the house, ask yourself:

·         Is there enough space for the present and the future?

·         Do you like the floor plan?

·         Is the yard what you want?

·         Do all the appliances work?

·         Does the home look to be in good condition?

·         Is it the right number of bed and bath rooms?

·         Will all your furniture fit? (Both in size and style)

It is important to find out what appliances and fixtures will be left and what the sellers are taking with them. Also, you want to picture (and possibly see) the home in different weather and times of day. This is the best way to really understand the home and the neighborhood. You don’t want to face any surprises after you are in contract.

When viewing homes, you should take a lot of pictures. You should capture the inside, outside, all the rooms and the yard. Also keep an eye out for anything you think may be an issue. If you don’t get all the pictures you want the first time, you can always go back for a second look. Also, ask your realtor for his/her professional opinion -they are a great resource.

Searching for the right home can be a long and daunting process. There is no set “magic number” of homes you should look at before you make your decision. You just need to keep looking until you find what you want. On average, you can expect to see between 10 and 20 homes before you find the right one. The best way to streamline the process is to make sure your agent knows everything that is important to you. This will ensure that you don’t waste time looking at places you know you don’t like.

I hope this makes your home buying process a little easier. Next week I will go over what to do once you found the home you want.

As always, feel free to ask a question or leave a comment below. Have great rest of the week!

Home Buying Tips: Part 1

With all that’s been going on with our economy real estate industry, there has been a lot of talk about now being the perfect time to buy a home. For many people, this is correct. Although lending guidelines are stricter than in the past, if you have decent credit, you can still get a great loan. There is a huge surplus of great homes for sale, prices are discounted and mortgage rates are at record lows. Because of these reasons, there are also a growing number of first-time home buyers hitting the market so I think it is a good time to go over the steps involved with the home buying process.

When trying to determine if you are ready to buy a home, ask yourself the following questions:

-Do you pay your current bills on time?

-Do you have steady income that is reliable?

            -Can you afford more monthly expenditures?

-Do you have savings for a down payment?

            -Do you have very little long-term debt? (i.e. car loan)

If you answered yes to these questions, you are most likely ready to buy.

To start the process, you must figure out what you need. Think about the size, area, and style of home you want. You should do some research online to see what is available and for how much money. You also need to figure out how much you can afford. This number may be lower than what the bank is willing to loan you, but you need to make sure your payments will not be so high that you cannot keep your other obligations.

When you apply for a mortgage, the lender is going to use two primary ratios to determine the maximum home you can afford. These are the Debt to Income ratio and Housing Expense to Income ratio. Your housing expense to income ratio is calculated by dividing your monthly mortgage payment by your gross monthly income. Gross income is your income before tax deductions and the ratio should not be more than 29%. Debt to income ratios are calculated by dividing your total reoccurring monthly debs by your gross monthly income. Those debts include credit card payments, personal loans, car payments, cell phone bills, alimony/child support, insurance and any other fixed bills which are paid every month. Your total debt should not be more than 41% of your gross income.

It is important to note, that these percentages are just guidelines and are not set in stone. Other factors which have influence are the down payment amount and overall net worth. Your net worth is the value of all your assets minus all your debts. If you have a high net worth, lenders will likely be very flexible when it comes to the ratios.

Next, you need to find the right real estate agent. Friends and family are a great source for finding agents. You should also look online; well-known agents should be easy to find through search engines like Google and Bing. Also check Realtor.com which does a good job of pairing clients with agents. Once you have a list of possible agents, you should start calling them. The best agents will have good knowledge of the area and will have many resources for finding you the right home. You want an agent who listens to you, not one who tries to make you change your mind a lot. The most important thing, however, is that you are comfortable and trust your agent. This is the best way of insuring you have a pleasant experience.

The final step, before actually looking for homes, is figuring out what you want and need from a property. Make a list of characteristics which are important to you. There should be two categories on the list; one for “must haves” and one for “wants”. This will make comparing houses easier. Think about the location, schools, size, yard, and age or anything else you think is important. Remember, this house is for you and your family. It is important to get what you want out of it.

So now you have some information to help get you started in the home buying process. You know how to figure out if you are ready to buy, what you can afford, how to choose a Realtor, and you have a list of what is important to you. Now is the time to get online and start doing some research. Check out as many websites as you can. You want to have some knowledge of what is on the market and what prices are like before you start visiting homes.

Next time I will go over how to find the perfect home for you; including what to look for in a community, where to get school info and evaluating comparable homes.

As always, feel free to leave a comment or question below and I will answer as soon as I can. Thanks and have a great rest of the week.

Choosing an Investment Property

Say you have a decent amount of money in the bank and don’t just want it sitting there. You want to have your money work for you, so you need to invest it. When it comes to investing, there are pretty much limitless possibilities.  You can invest in stock, mutual funds, bonds, cash deposits (CDs), commodities (gold/oil), collectibles, and many others. Now, if you have a substantial amount of savings and a decent credit score, investing in real estate may be your best option.

When it comes to investing in residential real estate, there are three basic options. First, you can do what’s called “flipping”, where you purchase a home that needs substantial amount of repairs and/or renovation. You then have the repairs done and try and sell the home for profit. The second option is to purchase a home, rent it out, and then sell it once it value has appreciated enough to turn a profit.  Finally, you can purchase an apartment building, and use the rents to generate income. Investing in an apartment building requires much more capital and knowledge of property management than the first two and therefore, I will save it for a later post.

Ok, now you need to choose between a rental investment and flipping.  There are pros and cons to both.  One of the major benefits to flipping is the quick turnaround. You buy the house, fix it, and then sell it asap. This is good when you are looking for a way to make 15% or as high as 50% return in under a year. But, there is also a high amount of risk involved. There is often an underestimation of the costs of all the necessary repairs. Buying a home and renting it out tends to be a little less risky, but it takes longer to see the return. However, this type of investment does not require as much cash as flipping does, because you can use the rents to offset the mortgage payments.  Both types require a good amount of work, by the investor, but in different ways. With flipping, you need to make sure all the work gets done well and in a timely manner, where the other type requires handling tenants or finding a property manager to do it for you.

So now, let’s talk about what you should be looking for in these types of properties. When looking for a property, regardless of whether it is to fix and flip or hold, there are a few things you need to keep an eye out for. You want to make sure the property is in well-established area. This is because newer developments tend to have more price fluctuation verses older neighborhoods.  Another important aspect is the school system. The quality of the schools in an area greatly affects the demand for housing and because you plan on selling the property, you want it to be as marketable as possible. Remember, if you plan on renting the property, there are going to be people living at the house (probably a family) so a good school district is not just important for selling the house, but finding quality renters as well. Finally, you need to keep an eye out for properties with a low price to square food ratio, when compared to other properties in the area. These will tend to give the highest rate of return.

This is just a brief explanation on types of investment properties. I will go into detail about evaluating each type of property in later posts. If you have any comments or questions you would like answered, don’t hesitate to leave them below. Who know, your question might be my next blog post.

Hope everyone had a great Thanksgiving. See you next week.