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The Home Investor - eTips
A BizBrick publication - January 2005 |
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In This Issue
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Deadly Secrets That May
Be Hiding In Any Home!
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November
Home Sales Set Records – 2005 market expected to remain strong
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Raising
The Money (archive)
-
Books
on investing in real estate
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In-Car
GPS Navigation
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Deadly Secrets That
May Be
Hiding In Any Home!
|
| When restoring older homes,
buyers and owners need to be aware of potentially deadly secrets any old
home may be harboring. Deadly because their effects on the body can be
fatal; and secret because they are not readily observed when looking around
a home. In a nutshell we're talking about:
Lead Paint
 Frequently used in paints and lacquers
prior to 1978, lead poisoning is the nation's number one environmental
disease affecting children. A seller has a legal obligation to notify a
buyer of lead paint present in the property and to provide a lead paint disclosure
to the buyer before signing a purchase and sale agreement. The older the
house, the higher the likely lead content.
The reason for this is that lead dust &
fumes are extremely toxic to children, especially those under the age of
six. In young children, too much lead in the body can cause permanent harm
to the brain, kidneys, nervous system, and red blood cells. Even at low
levels, lead in children's bodies can slow growth and cause behavioral and
learning problems. Lead is not only harmful to children: in the body of a
pregnant woman, lead can harm a baby before it's born; most adult lead
poisoning is caused by home renovation.
Many people mistakenly assume that, as long
as the children don't eat the paintwork, they'll be safe. Unfortunately
there are many circumstances that will lead to lead poisoning, such as
sanding down painted woodwork to repaint, which releases fine lead dust
particles into the air. These particles are so small they easily pass
through a vacuum cleaner's filtration system and back out into the air
(every time the floor is vacuumed). Drilling a hole into a surface painted
with lead paint will also release lead paint particles into the air. Lead
paint on moving surfaces, such as windows, releases fine lead dust just
through normal operation.
In addition, the older lead paint can flake
and blister. Children find the sweet taste of these paint flakes appealing.
Buyers, especially those with children
under the age of six, can have the lead paint encapsulated or removed (some
states mandate this by law). Licensed specialists typically must do this,
although some states allow the homeowner to obtain certification for
specific aspects of de-leading their own home.
For more information on lead paint and
other deadly secrets, go to www.ushomeinvestor.com/buyers/deadly_secrets.htm |
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November Home Sales Set
Records – 2005 market expected to remain strong
Low
interest rates helped the market for existing single-family home sales to
set the highest monthly pace on record in November, according to the
National Association of Realtors® (NAR). Existing-home sales increased 2.7
percent in November to 6.94 million units, 13.2 percent above November 2003
and beating the previous record set June 2004.
The
NAR expects 2005 to be comparable to 2004, forecasting a continuation of
strong home sales, although down from the record-setting pace of 2004.
Slower sales will help to create a better balance between home buyers and
sellers, but with tight inventories of homes available for sale, price
appreciation hasn't slowed yet. |
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From
The Archives
Raising
The Money! |
| Often the hardest part of investing in Real
Estate is not finding the right property, but figuring out how much to offer
and how to finance it! Cash is always a great option if you have enough of
it to invest, but very few property investors have the resources to use
their own cash in an investment property.
Many investment properties, especially
rehabs, don't fall into the typical property-financing model. For example,
an investor looking to remodel a summer cottage into a year-round home may
find problems with getting a loan because many lenders have a minimum living
area (e.g. over 850sf) required for loans.
This often means investors have to turn to
non-traditional sources of financing for their investment projects. A few of
the most common options include:
- Other people's cash
- Home equity loans
- Retirement accounts
- Credit cards
- Assumable loans
- Seller funding
Other People's Cash
Getting cash from other people can be done
in the form of personal loan notes from friends or family; loans from
non-traditional lending institutions (investment trusts, private money
lenders, investment partnerships, etc.); and even the seller of the
property.
The key to utilizing other people's money
to finance your investment purchase is to factor the cost of borrowing the
money on a short-term loan into the cost of remodeling the home, being sure
you can make a reasonable profit even if the remodel takes twice as long as
anticipated.
Remodel Investment Example
|
| List
price of the property |
$100,000 |
| Accepted
Offer price |
$80,000 |
| 1st
Loan from Aunt Hilda @1% per month ($200/month) |
$20,000 |
| 2nd
Loan from Private Lender @ 2% per month ($1,400/month) |
$70,000 |
| Expected
Repair Cost (funded from loans) |
$10,000 |
| Market
Value after repairs |
$130,000 |
| Cost
per month for loans |
$1,600 |
| Estimated time to complete repairs is three months
(budget six) |
|
Budget |
| Expected Selling Price |
120,000 |
| Loan repayments |
-90,000 |
| Project excess costs |
-4,000 |
| Interest (6 months) |
-9,600 |
| Cost of sale (5%) |
-6,000 |
| Expected Profit |
$10,400 |
In the simplified example shown on the
right, even if the project takes twice as long as anticipated, you can still
make a healthy profit. However, if the property were to take six months to
sell, your profits would be used up in interest payments; which is why we
sell the property at below market value to ensure a quick sale.
This is a critical calculation to do when
determining how much to offer for a given property (remodels only). By
determining how much the property should be worth after you have remodeled
it, you can calculate a maximum purchase price that will still yield a
satisfactory profit (ignoring the asking price for the property).
Of course there is no guarantee this
will always work as many factors can impact your calculations; for example,
the project could take longer than anticipated, the estimates of the costs
to complete the work might be too low, the anticipated market value after
completing the work might be too high. In fact, there are so many factors to
consider that the only real way to get a feel for how much you could make on
a given property is through experience. ...read more online |
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For Expert Advice
On Local Real Estate Deals
www.USHomeinvestor.com/specialists/specialists.htm |
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Book
Suggestions
Here are a few good books that
we hope you will enjoy as much as we did. (You can read more on any of these
books and buy from Amazon at the book club section online www.ushomeinvestor.com/books/)
|
The
Weekend Millionaire's Secrets to Investing in Real Estate
by Mike Summey, Roger Dawson
A good primer on real estate investing.
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The
Millionaire Real Estate Agent
by Gary Keller, Dave Jenks et al.
Not only guides Realtors on how to build a solid business
but also great lessons for any entrepreneur building a business from
scratch.
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Rich
Dad's Advisors®: The ABC's of Real Estate Investing
by Ken McElroy.
Another in the Rich Dad Poor Dad series; this one focused
on real estate investing. A good read with some good ideas for would- be
property investors.
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Plus a full range of books on Real Estate Investing and books
for the Real Estate Professional. |
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Mortgage
Rates Stay Low!
According
to Freddie Mac, the national average commitment rate for a 30-year,
conventional, fixed-rate mortgage was 5.73 percent in November, almost
unchanged from 5.72 percent in October; it was 5.93 percent in November
2003.
For the latest information on loan rates,
contact your local independent Home Investor Loan Specialist. |
|
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information, go to http://www.ushomeinvestor.com/promo/index.htm |
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For information on
Buying, Renovating
and Selling Real Estate go to
www.USHomeInvestor.com
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