Are Condos a Good Purchase?

Are Condos a Good Purchase?

Condominiums are traditionally the most volatile of real estate investments. Ask anyone who bought condos in the 1970s or 1980s (or in 2005-2007) and they’ll show you the financial scars on their backs.

Condos have made a strong comeback in recent years because of the popularity of purchasing second homes, particularly in resort areas. Whether this trend will continue is uncertain, but keep in mind that condos are generally a tougher sell in most areas than single-family homes. And because condominiums involve a homeowner’s association, you’ll have to deal with management issues, rules, and costs that may be out of your control.

When buying condos consider your prospective tenant or buyer when you resell. Is this priced so high that your pool of buyers is limited? It may be in the median price or below, but how many people live in one-bedroom condos? Is the development so old that the HOA (homeowner’s association) dues are high and will continue to rise as the development ages and needs repairs?

For the most part, condos tend to fit into two categories – rentable and livable. Cheap condos that rent well often don’t appreciate much in value. You can get away with buying a $50,000 condo and renting it for $500/month forever. In 20 years, it may barely have appreciated above inflation. A different condo near downtown or the beach may rent for negative cash flow and appreciate 10 – 15% per year. On short, the normal formulas that apply to single-family homes aren’t as consistent with condos, which is why investors need to approach condos with extreme caution.

Look for Limitations when Buying Condos

Be aware that some homeowners association rules restrict the rental of units, so make sure you check the limitations before you purchase a condo that you plan to rent. Also, many lenders have limitations on financing condos, such as a requirement that a certain percentage of the units be occupied by owners.

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How to Accurately Estimate a Property's Current Market Value

The most common mistake that many beginning real estate investors make is that they pay too much for property. Fact is overpaying for property is often cited as the number one reason why so many newcomers fail to make it as profitable real estate investors. That's because most beginning real estate investors are woefully undercapitalized, and they don't have the deep pockets that are needed to subsidize their overpriced real estate investments.

For many neophyte investors, paying too much for their first investment property usually proves to be a very costly and fatal mistake, and marks the beginning of the end of their foray into real estate. That's why it's imperative that you learn how to accurately estimate the current market value of potential investment properties! As far as I'm concerned, it's the single most important aspect of the entire real estate investment business!

A Fast $15,000 Profit for Knowing the Value of a Condemned House

I once bought a real estate option on a filthy, neglected, run-down, but structurally sound house in a neighborhood-in-transition in Winter Park, Florida, a suburb of Orlando, that had been condemned for building, safety, health and fire code violations. This place looked like something right out of downtown Baghdad, Iraq! It had what code enforcement inspectors commonly refer to as accumulations of every type of debris, garbage and junk known to mankind! The property's owner lived in Westerville, Ohio, and wanted the steady stream of threatening letters from the Winter Park Code Enforcement Board to stop.

I had done my homework, and knew the property was worth at least $110,000 after it was cleaned up. I ended up paying $500 for a one-year option to purchase the house for $75,000. It cost me $2000 to have all of the accumulations removed from the property, and the house, driveway and walkways pressure washed. Three weeks later, I sold my real estate option agreement for a $15,000 profit! This never would have happened if I had been clueless about how to estimate property values. Since I had an accurate estimate as to how much the property was worth in its current condition, I was able to negotiate a below market purchase price that was based on the property's filthy, neglected, run-down non-marketable condition, and not on how much it might have been worth after it had been cleaned up.
records are available online.

The Definition of Market Value

The Appraisal Foundation's Uniform Standards of Professional Appraisal Practice, defines market value as: "The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the sale price isn't affected by undue stimulus.”

The Difference Between Assessed Value and Appraised Value

The difference between a property's tax-assessed value and its appraised value is as follows:

1. Tax Assessed Value: Tax-assessed value is the value established by the local taxing authority for a parcel of land and the improvements placed upon the land for property tax purposes. For example, in Florida, owner-occupied single-family houses are generally assessed at around seventy percent of their fair market value by county property appraisers.

2. Appraised Value: Appraised value is the value estimate given to a property by a licensed property appraiser using accepted appraisal methods for the type of property being appraised. For example, the accepted appraisal method to accurately estimate the fair market value for an owner-occupied single-family house is the comparison sales method where a property's value is based on the recent sale of comparable properties within the same area.


The Three Common Methods Used to Estimate Property Values

The three most common methods used by property appraisers to estimate property values are the:

1. Comparison Sales Method: The comparison sales method bases a property's value on the recent sale prices of properties that are within the same area and comparable in size, quality, amenities and features.

2. Income Method: The income method is used to estimate the value of an income producing property based on the net income the property produces.

3. Replacement Cost Method: The replacement cost method is based on what it would cost to replace the improvements on property using similar construction materials and construction methods.

The Comparison Sales Method of Estimating a Property's Value

The comparison sales method of estimating a property's value is based on the recent sale prices of properties within the same area that are comparable in size, amenities and features. In order to be accurate, sale price adjustments must be made for comparable properties that have been sold at unrealistically low prices or on overly favorable financial terms not readily available to the buying public.

The Income Method of Estimating a Property's Value

The income method is used to estimate the value of an income producing property based on the net income the property produces. Under the income method value is calculated using a:

1. Capitalization Rate. The capitalization rate, or cap rate, is calculated by dividing a property's annual net operating income by its purchase price.

2. Gross Rent Multiplier. The gross rent multiplier, or GRM, is calculated by dividing the purchase price by the property's monthly gross operating income.

Watch Out for Owners Using Fuzzy Math

A word to the wise: when you read a property's income and expense statement, you should always go under the assumption that the owner is probably practicing fuzzy math by fudging on the numbers, and telling little white lies to back them up. Also, use a monthly income and expense analysis worksheet like the sample copy below, to cross-check everything that's listed on a property's income and expense statement in order to reconcile the statement with receipts and tax returns against what's shown on:

1. Schedule E (Supplemental Income and Loss) of the owner's latest federal income tax return.

2. The property's latest annual tax assessment income and expense statement on file at the county property appraiser or assessor's office.

3. All of the rental agreements for the past year.

4. Water, sewage, solid waste, gas and electric bills for the past year.

5. Repair and capital improvement bills for the past year.

The Replacement Cost Method of Estimating a Property's Value

The replacement cost method of estimating a property's value is based on the cost of replacing the improvements on the property minus the cost of the land to estimate a property's value. Replacement costs are calculated on a per square foot basis by dividing the total number of square feet in the building by the per square foot construction cost. For example, a two thousand square foot convenience store that cost $375,000 to build would have a replacement cost of $187.50 per square foot, $375,000 divided by 2000.


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Tips for Selling a House

As the real estate market returns to a normal pattern of buying and selling, some sellers are easily frustrated. If your house is not selling, here some tips for selling a house.
Tips for Selling a House

Selling a house is similar to a job interview or a first date. Presentation tends to go a long way in determining the outcome. That might sound a bit shallow, but it is simply a fact of life in many endeavors including real estate. To this end, sellers have developed bad habits when it comes to selling their house because of the recent hot seller's market. A few basic tips for selling a house can get you back on track. 

Most real estate comes with a garage. If you have lived in the property for any amount of time, you have undoubtedly stored numerous things in your garage. I have! When the time comes to sell your property, however, you need to give your garage the once over. Items you consider priceless heirlooms might be considered junk by buyers. A messy garage is also a negative. Remember, buyers expect you to have the house in pristine condition. Anything that does not reflect that will hurt you in the eyes of these individuals.

Undoubtedly, your house has some amazing interior features. Instead of just assuming the potential buyer understands the value of them, you should highlight the features. The best method for doing this is lighting. Make sure you have sufficient lighting in the relevant area by opening drapes or going with more powerful light bulbs. If you have beautiful marble flooring and counters in your kitchen, make sure there is sufficient lighting to make them stand out.

Your lawn is the first thing a potential buyer is going to see when they pull up to the property. Keep it trimmed and cut back any jungles. Give some thought to the walkway to the front door. Planting flowers and such can go a long way.

Make sure the entrance is a positive aspect of your house, not a negative. Make sure the front door is in perfect shape. The entry area should also be focused on. Add plants, rugs and what have you to make a good impression. Next, walk in through the front door and take in the view. Is there anything that gives you pause and can be improved? If so, do it!

Declutter, clean, and organize all storage areas.

The real estate market has cooled to the extent that houses are not selling in three days anymore. Three months is more nearly the norm in many areas. Returning to the basic fundamentals of selling a house is the key to getting the offer you need. These tips for selling a house should help.

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Quick Ways To Sell a House

Every homeowner is looking for quick ways to sell a house. It is just a fact of life and to be expected. Of course, the real question is how you achieve your goal!
Quick Ways To Sell a House

Once you decide to sell your house, you want to move it quickly. That may sound like an assumption on my part, but I have yet to meet a seller who wanted to wait months and months before accepting an offer. Admittedly, they are probably out there, but you are not one.

So, let's cut to the chase with the following tips on quick ways to sell a house.

1. Don't worry about major upgrades. This can be expensive and time intensive. Worry about quick changes that will make major visual improvements. We are talking touch up paint and landscaping.

2. As moronic as it sounds, clean your house! And the garage! And the side of the house you haven't visited in a few years! And the closets! And the garage again! Have the carpets professionally cleaned. Heck, have the entire home professionally cleaned. You want to aim for the look of a model home in a new development.

3. If you have children, a battle may be required. I am talking about their rooms, the place where few parents are willing to tread. Posters on the wall come down. Now. Beds made, clothes in the hamper. Yes, the closets must even be organized. I fully realize this may sound like Mission Impossible IV, but it must be done. Threats and bribery are highly recommended to achieve the desired results!

4. If you have pets, they belong outside. No, I am not against pets. The issue is their hair on the carpet?the couch...and so on.

5. Smell is one of our senses that figure into our impressions more than we realize. If you are going to be showing the home, get flowers, candles or cook something mouthwatering before the potential buyer arrives.

The above represent common sense tips on quick ways to sell a house. They will help you close that deal, but there is one area that is the key to really moving a house quickly - the price.

The quickest way to sell a house is to list it below similar homes for sale in your area. It is that simple. Buyers are looking for a steal. Generally, this translates into buying the cheapest house on the block with the intention of upgrading it and reaping equity gains. Some get around to the upgrades, some do not. Regardless of the condition of your home, the key to moving it is price.

See, there are quick ways of selling a house. Most of the steps are based on common sense. As to setting a price, you want to be below the homes in your area. How far below depends on how quickly you want to move the property.

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How to get Explosive Profits by Establishing the Value of Real Estate

You've located the property that you are potentially interested in purchasing, have looked at it, and determined that it meets your basic investing goals. Before you pat yourself on the back for a job well done, you need to establish its value to avoid potential financial disaster. If you take the word of the seller or the county tax rolls to establish its value, you could lose your shirt, especially in a real estate market that has seen values drop by tens of thousands of dollars within a matter of months.

Depending upon the kind of investor you are you'll utilize one of the three methods of establishing the value of a property. They are:

Comparable Sales – If you're investing in primarily single-family or multifamily properties with fewer than five units, by far the most popular method of establishing value is the comparable sales method. This method consists of locating recently sold properties that are substantially similar to the one you are considering purchasing and are located in the same general vicinity. A skilled appraiser typically has many years of experience in determining value, but you can do the same thing either by going to your county courthouse and compiling the information yourself or by working with a realtor who might be willing to provide these figures to you. You can also get a rough estimate of values in many areas by utilizing an on-line resource such as Zillow.com. Once you have your comparable sales figures you’ll need to compensate for any differences, such as the lack of a garage, fireplace, or even a swimming pool. In order to compensate for the differences in square footage of your subject properties, you can divide the sales prices by the square footage of living space to come up with a cost per square foot.

Replacement Cost – While not nearly as popular as the Comparable Sales method, another way of determining the value of a property is by estimating what it would cost to re-create the same property in the same area. You would need to determine building costs, the cost of materials, and also make allowances for depreciation of the property so that it is substantially similar to the property you are considering purchasing. If you're experienced at estimating building costs accurately and are aware of the current cost of building materials and supplies, the replacement cost method may be one which you will want to utilize. However, it isn't utilized very frequently. If the Replacement Cost method is one that you'd like to use to determine value, you could very quickly arrive at a figure by contacting a local contractor and asking them how much they would charge you by the square foot to build a home in the area of your subject property. Don’t forget to factor in depreciation to match the condition of your subject property.

Income Valuation Method – The third method of determining the value of a property is to use the Income Valuation Method, sometimes referred to as the Net Income Approach. This method is used to determine the market value of a commercial property or a residential property with more than five units. It’s a relatively simple process. First, determine what the gross income is for the property and then subtract all expenses, including debt service on an annualized basis. Multiply that figure by a factor of ten. The resulting number is about what your property is worth. What’s nice about this sort of property is you can increase its value simply by increasing its net income, reducing operating expenses, or both.

Once you’re able to determine the value of a property you can write an intelligent offer that doesn’t cause you to run the risk of overpaying for a property. Remember, though, that real estate prices are extremely volatile right now, so make sure any properties you use for comparative purposes are recent sales figures. If you have accurate numbers, you can write impactful, precise bids that stand a greater chance of being accepted and allowing you to turn average returns into explosive profits.

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How to Find the Right Builder

Where To Look

The first piece of advice anyone will give you is to go for personal recommendation, but there’s more to do than simply getting a name from a neighbour. Talk to people locally who’ve had building work done recently – especially on a house of a similar age, and on a project of a similar size, as this will help you track down someone with the right expertise and an appropriate size of firm. If you are using an architect for your project, they may also have recommendations.

#1 Interview several builders. Ask an architect for recommendations. If a real estate agent assisted you when you purchased your lot, ask the agent for several recommendations. Also consult friends and neighbors.Once you’ve assembled some likely candidates from reliable sources, ask at least three builders for a written quote. The more detailed you can be at this stage about what you want done, the more accurate the quote will be. This is obviously easier if you already have architect’s plans or drawings you submitted if you had to obtain planning permission. Be clear about what needs to be included as well as the job itself: materials, taking away rubbish and so on.

#2 Review your completed plans with each builder, or ask the builders about designing plans for you.You should also ask for at least three references from each builder. You need to take the time to follow these up, and if possible, pay a visit to check the quality of the job. Ask plenty of questions about the builder’s work and how the project went, as you may find out details that’ll be much more useful than a general, ‘Yes, it all went fine.’

#3 Make sure that all the builders see the building site and are quoting to build the house on that site, including excavation and any other site-specific costs. You should also make sure that each builder you ask to quote has appropriate liability insurance – ask to see the certificate.

#4 Get price quotes from the builders and compare them, making sure that they each bid on the same items.It’s also important to ask about payment terms. If they ask for a deposit, be wary. However, it is normal for larger projects if they ask to be paid in installments as each stage is completed.Deposits are usually only payable where specific or custom-made materials are required or where the project will take a long time to complete. Otherwise, avoid paying deposits, and agree any payment schedule in writing.

#5 Ask for references--particularly previous customers--from each party. Check the references. Be sure to speak with them when the builder is not present. Look at some of the houses the builder has constructed.If possible, start by getting a referral from family or friends who have recently had work done.

#6 Retain an attorney with experience in construction cases to draft or review the contract. Be sure that the payment schedule for the builder is clear and understandable.Ensure the builder belongs to a respected trade organisation as it will have membership standards and requirements. Don't forget to make a call to make sure membership is current.

#7 Make sure that the contract specifies the start and completion dates. Insist on some type of late fee or penalty if the completion is delayed past a certain grace period (notwithstanding circumstances beyond the builder's control, such as inclement weather).Contact your local builders association and ask for a list of registered members. The National Federation of Builders has 14 offices around the country which can provide you with a list of registered builders in your area.

#8 Execute the approved contract.Ask two or three builders for estimates in writing. Ask them to confirm whether there is any planning permission required for the work.Ask each builder for two or three references from previous customers. Contact these people and find out how happy they were with the work carried and the builder's conduct. If possible go and view some of the work.

#9Make any required deposit payment, and be sure to write your checks as per the schedule (not earlier and not later).You should make an agreement or contract in writing with your builder. It should outline the work to be done, date of completion, security and safety, catering and lavatory arrangements, disposal of waste materials, hours of working and so on.Ask to see the builder's public liability insurance certificate. Also, the building work may affect your home and contents insurance - contact your own insurance company.

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Modern Small Kitchen Design Ideas

Modern small kitchen designs are very much in demand these days however, unlike earlier when the idea of modern small kitchen design was not so popular but opposite to it, nowadays people are giving more emphasis to modern small kitchen design. It seems as if modern lifestyle is completely coordinating with Modern design, which in fact has made it possible to have modular yet modern kitchen even in a very small area.

Never the less, due to the fact, that there are various Modern small kitchen designs available these days, the implication of right and appropriate Modern small kitchen design is the most significant concern. So if you also want to implement particular Modern small kitchen design in your kitchen there are several things, you should consider.

The foremost aspect in this context is to select a particular theme for kitchen design, doing this will enable you to bring a splendid change within a particular region also, you will be able to coordinate things accordingly. Otherwise, if you try to implement change in very small kitchen area without even considering particular kitchen theme, you will merely end up creating mess.

If you don’t have any idea about it, collecting relevant information for modern small kitchen design is the best solution for the same and online is the best place to acquire necessary information about kitchen designs. Next important thing one need to emphasis while considering specific modern small kitchen design is the use of kitchen equipments and kitchen amenities you require.

Always remember that besides making kitchen area look good, the kitchen design should also complement kitchen amenities, as it is the most significant aspect of modern kitchen designing.

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