A Reality Check on Real Estate

New statistics on the real estate market show home prices have risen by about 9% over the past year. Does this mean that real estate is back?

On April 30, the Standard & Poors/Case-Shiller Home Price Indices release showed that a composite of real estate prices in 20 major metropolitan markets had increased by 9.3% over the past year, the best annual gain since May 2006. Does that mean the housing market is back to the heady days of the real estate boom? A quick reality check shows that not to be the case — which may be good news for would-be home buyers.

A dose of reality

The first reality check is to look at how far home prices are still down from their peak levels. Despite the recent increase, home prices are still about 30% below the peak reached in the summer of 2006. Those prices have only recovered to the level first reached in the fall of 2003, meaning that homeowners on average have gone nearly a decade without seeing any increase in the value of their homes.

The second reality check is to recognize how much housing prices are dependent on current mortgage rates. Thirty-year fixed rate mortgages ended April at 3.40%. That means current mortgage rates are about 49% lower than they were when housing prices peaked in the summer of 2006, and about 43% lower than they were in the fall of 2003 when home prices were comparable to today’s levels.

When you factor in those lower interest rates, people are paying far less for housing than they did at the peak of the real estate market, and even considerably less than they did when prices were at a similar level back in 2003. Take away the extraordinarily low level of current interest rates, and it is likely that the housing market would still be getting worse — not better.

Winners and losers

Naturally, people who are in a position to buy a house in the near future are the winners in this situation. Despite some recent improvement, housing prices are still well below peak levels, and mortgage rates are at or near record lows. That adds up to greatly reduced costs for home buyers.

Less fortunate are people who bought their houses around the peak of the real estate boom. Property values are still well below what these homeowners paid, and as a result they may not have been able to take advantage of today’s attractive refinance rates.

Also among the losers of the housing situation is anyone with a stake in the U.S. economy. Housing prices are widely followed as an indicator of the economy’s health. Given the fact that record-low interest rates have so far fueled only a modest recovery in housing prices, the latest real estate news is hardly a sign of robust economic growth.

Should Home Ownership still be Part of the American Dream?

Home prices are surging, but home ownership is down, which couldn’t make entrepreneur and author Patrick Bet-David happier.
Home ownership used to be a major part of the American Dream, but Bet-David says it’s time to rethink that vision.
“The American dream has nothing to do with real estate it has to do with free enterprise and freedom,” says Bet-David, who wrote the book The Next Perfect Storm, and is chief executive of financial services marketing organization PHP Agency. “You shouldn’t even think about owning a home if you don’t have 12 months of mortgage payments set aside.”
Blame it on the real estate industry or mindset passed on from previous generations, but for whatever reason, many Americans believe owning a home is a true sign they are living the American dream. Even if they can’t afford it or aren’t ready.
“It’s the greatest lie ever sold,” says Bet-David. “Hundreds of thousands of families are going through the pain and struggle of trying to not miss their next mortgage payment simply because they purchased a home prematurely.”
If history is any evidence of the future, he says buyers are going to pay more than they can afford to buy a home in this new real estate cycle. Recently the prices of houses in sought-after neighborhoods have been rising to levels not seen since the real estate boom—good news for the housing market and economy, but not so great for buyers. Bet-David says the surge isn’t being driven by consumers looking to buy, but investors seeking to profit from the recovery. And because investors can offer all-cash offers, they are freezing out frustrated buyers.
According to the latest S&P/Case-Shiller Home Price Index, which came out at the end of April, the average price for homes in 20 cities rose 9.3% for the year ending in February. That gain marks the biggest annual increase in home prices since May 2006.  At the same time, the Census Bureau reported home ownership stood at 65% in the first quarter of this year, down from 65.4% last year and the lowest level since the third quarter of 1995.
According to Bet-David, investors might be doing regular home buyers a favor pushing them out of the market, since many don’t have 12 months of mortgage payments, which could set them up for financial hardships down the road.
“People get in debt and it has a direct effect on divorces and on stress,” he says. “Millennials are afraid of buying a home because they saw what happened to their parents.”
In addition to having a year’s worth of mortgage payments saved, Bet-David says would-be home buyers also have to have enough money saved to cover taxes, insurance, association dues and maintenance and repairs. After all the chances of something happening, whether you get laid off or the roof starts leaking, are pretty high.
But Bet-David says people could use this money in better ways . “A home is the farthest thing from building equity. It’s one of the greatest expenses known to mankind,” he says. “Most people would be so much better off taking the money they put into a home and starting a business.” The way he sees it, if you launch your own business it’s one of the quickest ways to acquire wealth–granted you are successful. Once you have the extra cash you can buy a home and truly enjoy it.
Starting a business can be intimidating to many people, but Bet-David says you only have to look as far as your hobbies for your endeavor whether you launch a photography business or sell jewelry online. “We need more people starting a business instead of buying a home,” he says. “Do something on the side to start pulling up the primary income.”
Article Source: http://www.foxbusiness.com/personal-finance/2013/05/15/should-home-ownership-still-be-part-american-dream/

Amateur investors tap 401(k)s to buy homes

In order to get in on hot housing markets, amateur investors are buying up homes and taking risky measures — like tapping their retirement accounts — to fund the deals.


“We’re seeing many people cash out 401(k)s or IRAs because they want to take advantage of the market,” said Sean Galaris of financial services firm LM Funding, based in Tampa. “This new scenario involves people losing significant personal funds since they are financing real estate through retirement accounts, savings and life insurance.”


Galaris should know. His company buys delinquent fee accounts from condo associations and collects the debts. Many of the condo owners he collects from either resort to tapping their 401(k)s or IRAs when they come up short for expenses like maintenance fees or have already used up those funds to buy the property in the first place.


Lori McDermott, an insurance broker from West Seneca, N.Y., took out a $50,000 loan against her 401(k) for a downpayment on a home in Sarasota, Fla., last December. A short sale, McDermott got the place for $225,000 — a steal considering the seller owed $465,000 on the mortgage.


But still, it’s a risk. If McDermott loses her job or quits, then any unpaid part of the loan will come due immediately and will be subject to income tax and possibly a 10% early withdrawal penalty.


“The decision to take money from your 401(k) is not for everyone,” said McDermott. At the age of 48, she has already had five arterial stents implanted. “Having heart disease put me in a position where I was scrambling for life insurance,” she said. ” I looked elsewhere to create a legacy: real estate.”


Adam Bergman, a tax attorney for IRA Financial Group in New York, gets several calls a day from clients like McDermott looking to invest their retirement funds in real estate.


“Our average client has retirement accounts of about $150,000 and is looking to buy one or two properties,” he said. “After 2008, they didn’t trust Wall Street. They wanted hard assets.”


But Wall Street is getting into this market as well and that is driving prices higher. Many of the single-family homes and condos that have been purchased over the past three years have been snapped up by hedge funds, foreign investors, private equity and wealthy real estate partnerships.


 The large-scale purchases these investors are making are driving up prices in markets that were hit hardest during the housing bust. Atlanta home prices jumped 16.5% in the 12 months ended in February, according to the S&P/Case-Shiller home price index.


In Las Vegas, which was ground zero for the foreclosure crisis, prices have climbed 17.6% and Phoenix has seen an increase of 23%. In Florida, Tampa and Miami have recorded double-digit increases.


“They bought a lot of stuff cheap last year, but now they’re paying market value,” said Jack McCabe, a Florida-based real estate consultant. “Sometimes they’re overpaying.”


As home prices rise, profits are harder to come by for investors than they were a year or two ago. “There’s no way they can get an 8% return buying at today’s market prices,” said McCabe.


 After deducting all the fees, taxes, maintenance and other costs, “They’re lucky to get a 2% return,” he said.


And that’s if all goes well when they rent out the property. It often does not. Investments in rental properties can quickly sour if, say, a tenant stops paying rent for a few months or if a condo or homeowners association imposes special assessments to pay for major repairs.


“When that happens, investors may not have the wherewithal to pay their monthly common charges and property taxes,” said Galaris. “A whole lot of the people in the markets are not experts.”


Galaris said amateur investors sometimes spend all their free cash on their purchases and then have to scramble to pay the fees. If the real estate market turns south again, that could leave a lot of investors in dire financial condition for their golden years. To top of page


Article Source: http://money.cnn.com/2013/05/20/real_estate/amateur-investors/

Don't Fall for these 10 Mortgage Misconceptions

Mortgages are tricky and often hard to understand. Because most people only purchase a home every five to seven years, prospective home buyers understandably don’t spend a lot of time in the interim educating themselves about mortgages and the mortgage process.

With the real estate market picking up and mortgage rates prime for refinancing, Zillow has compiled a list of common mortgage misconceptions based off the results of the just released 2013 Mortgage IQ Survey.

Misconception No. 1: Your interest rate reflects the true cost of your mortgage

Your annual percentage rate (APR) is actually the figure that represents the true cost of your mortgage. It is inclusive of your interest rate, points, mortgage insurance (when applicable) and other fees, including origination and underwriting fees. It does not include the cost of your homeowners insurance policy. The APR is typically higher than your interest rate because it incorporates the rate and the fees. In fact, when shopping for a mortgage, it is best to compare loans based on APR instead of the interest rate because it gives a better sense of the total cost over the life of the loan.

Misconception No. 2: Mortgage rates are only released once per day

Mortgage rates for all types of mortgages can change frequently, sometimes dramatically, throughout the day. Because of the rapid changes in mortgage rates and a lender’s ability to control what is offered, it is important to shop around for the best rates. Getting multiple loan quotes is highly recommended.

Misconception No. 3: All lenders are required by law to charge the same fees for appraisals and credit reports

There are no laws that require lenders to charge the same fees for services such as appraisals or credit reports. In fact, in order to make their loan quotes more competitive, some lenders may waive charges for such services. Conversely, some lenders may charge higher fees for these services, so it’s important to shop around.

Misconception No. 4: I must get my mortgage through the same lender I was pre-approved with

A pre-approval is a conditional agreement that estimates the size of the home loan a lender would fund for you. It typically involves income verification and a credit check. However, you are under no obligation to proceed with the lender that gave you the pre-approval. Make sure you get at least three loan quotes before proceeding with a mortgage.

Misconception No. 5: You will almost always get the best mortgage interest rates at the bank where you have a checking account

While some banks do give their customers discounts, it’s unlikely your bank will offer the best interest rate available simply because you bank there. To get a competitive mortgage rate and terms, get quotes from multiple lenders either in person or online — including your bank — and pick the one that works best for you.

Misconception  No. 6: When taking out a mortgage with your spouse, lenders will look at each of your credit reports equally when determining the interest rate you qualify for

When applying jointly for a mortgage, lenders will pull your credit scores from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. They’ll then take the middle score of each set and use the lower of the two to help determine your mortgage interest rate. This means that the least creditworthy borrower will have the greatest effect on your monthly payment. It does not matter who the primary or secondary borrowers are.

Misconception No. 7: You cannot get a home loan with less than a 5 percent down payment

It is a common misconception that you need to put down 10 percent, 15 percent or even 20 percent on a home, especially in light of the recent housing crash. But with as little as 3.5 percent down, you can often obtain a mortgage through the Federal Housing Administration (FHA). FHA loans have become a popular loan option for those who may not have a large down payment or have blemishes in their credit history. FHA loans are available to everyone, not just first-time home buyers.

There are also alternative loan programs through other agencies, including the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA). These loans also require little-to-no money down.

Misconception No. 8: If you go through a short sale or foreclosure, you must wait 7 years before getting another home loan

In most cases, to buy a home after a short sale, you’ll typically only need to wait 2-4 years depending on your down payment and the loan type you select. The waiting period after a foreclosure is longer: Typically you’ll need to wait 3-7 years before getting another home loan. Even if you can afford to get a mortgage right now, you’ll need to have a good credit score, which can be difficult to rebuild in just a few years. Unique circumstances can lead to different outcomes, so make sure to check with a lender or two.

Misconception No. 9: If you are underwater on your home loan, you are unable to refinance

It is estimated that millions of homeowners who are underwater and current on their mortgage can refinance using one of two special government programs. The first, the Home Affordable Refinance Program (HARP), is available to homeowners who have a loan backed by Fannie Mae or Freddie Mac. The second program, FHA Streamline Refinance, has recently been modified to help homeowners with loans insured by the Federal Housing Administration (FHA). Both programs help homeowners refinance into lower interest rate loans and may help dramatically lower payments without very much cost to the borrower. Zillow Mortgage Marketplace is the only online mortgage marketplace where you can get loan quotes for HARP and FHA Streamline. As an added bonus, it is the largest mortgage marketplace where you can anonymously get loan quotes, meaning you don’t enter any personally identifiable information and therefore cannot get spammed and hounded by lenders who were sold you contact information.

Misconception No. 10: You can only refinance your home loan once every 12 months

With conforming loans backed by Fannie Mae or Freddie Mac (the vast majority of loans today), you can refinance as frequently as you’d like so long as you do not take cash out when you refinance and are just refinancing to lower the interest rate and/or term of your mortgage. The rule of thumb is to wait until the difference between your current interest rate and the available interest rate would save you enough money each month to cover the costs of refinancing in 2 years. The amount of time that you plan on being in the home should be considered, as well. In general, refinancing will be more financially beneficial the longer you are in the home.

Issue 19 – May 16

Feature News

  • It’s Still a Housing Rebound, Not a Bubble

  • Real Estate Reality TV Shows: Fact vs. Fiction

  • Investing In Real Estate For Beginners – Lease Options

  • Real Estate Matters: Low mortgage rates are an opportunity

  • Trump: 87-year-old woman 'is trying to rip me off'



Quick Tip

If you want to increase turnover you need to buy below market price because eventually you will be able to sell it at the market price. And prices in real estate do not change on daily basis. There are certain classes of sellers who care more about time than price. Buy from people who sell seized and/or foreclosed property, corporations, disinterested heirs and probate attorneys. Tax sales and privates auctions are two other options for finding good deals.


What They Said

"Thank you for the opportunity to learn your system! I found the information that you delivered so powerful, practical and thorough. I have attended many seminars and found your information to be a cut above most others due to the details that were included that told us not only what we need to do but how to do it. Lou promised right from the beginning to give the "how to" information and not hold back. He delivered on that as promised!"

- Rob B.



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Trump: 87-year-old Woman 'is trying to rip me off'

Billionaire mogul Donald Trump, his signature bravado on full display Wednesday, clashed repeatedly with the opposing lawyer during a second day on the witness stand at a trial in Chicago.

Trump incessantly talked over attorney Shelly Kulwin as he sought to make his points. Kulwin raised his voice as he moved over and over again to strike Trump’s remarks. Finally, the lawyer jabbed at the lectern and demanded that the judge grant him a sidebar for a private discussion.

Instead, U.S. District Judge Amy St. Eve dismissed jurors from the courtroom and issued a calm but pointed reprimand, addressing a silent Trump and a frustrated Kulwin like a parent correcting misbehaving children.

“You’ve been dancing around and boxing with each other for the last 45 minutes,” she said. “… You’ve got to stop it. Let’s get control of ourselves.”

The sparring came during Trump’s testimony at a trial stemming from a lawsuit by Jacqueline Goldberg, 87, alleging that Trump International Hotel and Tower reneged on financial incentives promised to early investors in the luxury downtown development.

St. Eve told the chatty Trump to narrow his responses and stick to the questions asked of him. She told Kulwin to simplify his questions about the complicated condo deal at the heart of the dispute.

“I’m going to give you both time to catch your breath,” the judge said. “… Do you think the jury likes this? If you do, I can tell you they don’t.”

Over the two days of testimony, Trump dodged and weaved, trying to distance himself from specific knowledge of the condo development plans, often trailing off into lengthy observations about his many hotels.

Trump also took every opportunity he could to tell the jury that a clause in the contract allowed him to change plans and that Goldberg had asked for that right to be removed. Yet her request was refused, and she bought two condos anyway, he said.

“And then she sued me! Unbelievable!” he said, his voice rising as he lifted his arms and grimaced in a moment reflective of the Trump the nation has come to know from his network TV reality show.

When the real estate mogul’s testimony ended, he took his complaint with Goldberg to the Dirksen U.S. Courthouse lobby, telling reporters that the mother of four was scamming the billionaire to keep her $500,000 deposit.

“She’s trying to rip me off,” Trump said in a matter-of-fact tone. “She really is. She concocted the whole situation.”

He then accused the octogenarian of “playing the age card.”

When Kulwin was told of Trump’s remarks, his laugh echoed in the courthouse lobby. It was Trump who played Goldberg, her lawyer said.

“She comes from a different era … where people like Donald Trump didn’t exist. She comes from an era where a deal was a deal,” Kulwin said.

Goldberg, who is a financial planner and real estate developer with a master’s degree, contends that she carefully investigated the purchase of the two units at Trump as long-term financial investments after learning of the development. Among the incentives to buy was the promise that purchasers of “hotel units” would share in $5 million in profits from meeting rooms and ballroom rentals.

But by the time she closed on the deal in 2006, the incentives had changed, the lawsuit alleged.

Kulwin pressed Trump about his extensive knowledge of the hotel business, suggesting he knew early on that he would rescind such attractive incentives because they didn’t make financial sense and gave investors too much control.

“Are you one of the leading hotel guys in the country?” Kulwin asked. Yes, Trump responded.

But under questioning by his own attorney, Trump, 66, flatly denied that he ginned up a plan to dangle false incentives to attract investors.

“Absolutely not,” he said.


Article Source: http://articles.chicagotribune.com/2013-05-15/news/chi-donald-trump-trial-20130515_1_donald-trump-trump-international-hotel-testimony




Trulia: It's Still a Housing Rebound, Not a Bubble

Home prices today are rising nearly as fast as they did during the peak bubble years of 2005 and 2006. Since that bubble helped push us into the Great Recession, we should all be on high alert for the next housing bubble. To track whether home prices are in or nearing bubble territory, today we introduce Trulia’s Bubble Watch, which is based on the most recent price data from the Trulia Price Monitor and other data sources. So are we in bubble territory? No. bubble-phobes can rest easy. Even with recent sharp home price increases, prices are still low relative to fundamentals and are far below bubble levels.

Back to Basics: How to Spot a Bubble

To see a bubble, you first need to know what you’re looking for. A bubble in home prices (or in the price of any asset, such as stocks or even tulips) is when prices soar above their fundamental value. Fundamental value is based on supply, demand and realistic expectations about the future. We all learned in Economics 101 that prices move back toward an equilibrium determined by fundamentals of supply and demand. In a bubble, however, rising prices encourage speculation and fuel further demand — up until when the bubble suddenly bursts and people rush to sell, which causes prices to accelerate downward, sometimes well below their fundamental value. Bubbles are notoriously difficult to predict and hard to confirm until after they’ve burst. It’s impossible to be sure whether price gains are justified by fundamentals until, if and when, a bubble bursts. San Francisco home prices, for instance, are the highest in the country; is that “irrational exuberance” by speculative homebuyers, or are those prices justified by strong job growth, high incomes, great weather and constraints on the local housing supply?

To answer that question, we assess whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes and rents. Incomes determine how much people can pay for housing, and price increases aren’t sustainable if they push prices too high relative to incomes. Rents reflect how much people value housing even if they won’t benefit from price appreciation (as renters don’t, but owners do); the price-to-rent ratio is like the price-earnings ratio for stocks. Using data from multiple sources, we create several measures of fundamental value and combine them in order to calculate how overvalued or undervalued home prices are relative to fundamentals.

Home Prices are Undervalued 7% Nationally and Regionally in 91 of the 100 Largest Metros

We estimate that national home prices are 7 percent undervalued in the second quarter of 2013. During the last decade’s bubble, prices were as high as 39 percent overvalued in the first quarter of 2006, then during the bust, they fell to 15 percent undervalued in the fourth quarter of 2011. Therefore, even with the recent price increases, home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble. That’s why today’s price gains are actually still a rebound, not a bubble. This chart shows how far prices are from bubble territory:

At the metro level, prices are below their fundamental value in 91 of the 100 largest metros. Prices are overvalued in the California metros of Orange County (plus 9 percent), Los Angeles (plus 5 percent), San Jose (plus 3 percent), and San Francisco (plus 2 percent), and the Texas metros of Austin (plus 7 percent), San Antonio (plus 5 percent), and Houston (plus 2 percent), as well as in Portland, Ore., (plus Honolulu, which at 0.01 percent is ever so slightly overvalued). The California metros are far less overvalued than at the height of the bubble — Orange County prices were 71 percent overvalued in the first quarter of 2006! Even the Texas metros, which largely avoided the previous decade’s housing bubble, are less overvalued today than at their peaks during the last bubble.

Prices are most undervalued today in Las Vegas and Detroit, even after their price gains in the past year. Several Florida and Ohio metros are also among the most undervalued. All of these metros were overvalued at the height of the bubble, some less so than others.

Other indicators aside from home prices, such as mortgage lending and construction activity, confirm that the housing market isn’t forming a new bubble. Mortgage credit remains very tight, especially for people with lower credit scores, and the new “qualified mortgage” rules under Dodd-Frank intend to prevent the recurrence of toxic mortgages that artificially inflated housing demand in the last bubble. Also, construction activity, though rebounding, is still well below normal levels, and the vacancy rate is falling, so there’s no evidence of overbuilding today like we had during the last decade.

Is the Next Bubble Coming Soon?

If prices keep rising as fast as they are today, we’d be back in bubble territory in several years. However, prices are unlikely to keep rising as fast as they are today for three reasons:

1. Inventory should expand. Tight inventory is boosting prices today as buyers bid up prices on scarce homes; however, as prices continue to rise, more people will sell as they get back above water or decide to cash out, and more new construction will add to inventory.

2. Mortgage rates should rise. Low mortgage rates today increase buying power because borrowers can afford a more expensive house for the same monthly payment. Rates are likely to rise as a result of the strengthening economy, either through market forces or Fed actions, which – along with more inventory – should slow down price gains.

3. Investor interest should fade. Undervalued prices have attracted investors, who have helped push up home prices as they have bought and rented out homes. But as prices rise, investor interest will fade.


Article Source: http://realestate.aol.com/blog/2013/05/14/housing-bubble-or-recovery/

Real Estate Reality TV Shows: Fact vs. Fiction

From million-dollar island bungalows to multifamily homes in the ‘burbs, reality TV shows on Bravo, HGTV and other networks take viewers behind the scenes of the home-buying process. HGTV’s “House Hunters,” for instance, shows a couple or individual with an opinionated sidekick who tour three properties and discuss the pros and cons of each property before choosing one.


Real estate shows, especially those featuring pricey properties, often appeal to viewers on an aspirational or voyeuristic level. “It’s about seeing beautiful homes and properties that people might not get to see,” says Steven Aaron, a Keller Williams broker in Beverly Hills, Calif., and a regular on HGTV’s “Selling L.A.”


However, those beautiful properties aren’t always what they seem. Last year, a Texas couple who appeared on “House Hunters” revealed that two of the houses they toured on camera weren’t even on the market. They scrambled to find properties similar to the one they bought and wound up touring friends’ houses on camera.


Some viewers were outraged, but HGTV didn’t deny it. In fact, production crews don’t start shooting until after a deal has closed or is in escrow in case things fall through, according to Herman Chan, a San Francisco real estate broker who’s appeared on HGTV’s “House Hunters” and “My Home is Worth What?” He says the properties the homebuyer tours may or may not have been on the market when the homebuyer started looking.



A lot of reality TV is staged, Chan points out. “People still watch even though they know a lot of it is produced because it’s about the journey,” he says. “It’s the same reason people watch ‘The Bachelor.’ They love watching the emotional highs and lows.”


For “Selling L.A.,” Aaron says crews film about 40 hours of footage over several months and cut it down to a nine- to 10-minute story, with two stories per episode. “Unfortunately, there’s never enough time to get into the detail,” he says. “It’s much more intricate because you’re dealing with so many moving parts that can’t be shown.”


The process from house showings to closing takes only about 22 minutes on TV, but in real life, it can take several months. Reality shows rarely feature homebuyers doing important tasks such as choosing an agent, talking with home inspectors or applying for a mortgage, though they often mention getting pre-approved.


“It’s a very condensed version of what to expect,” Chan says. “On ‘House Hunters,’ they’re just showing the happy moments where you’re shopping. Afterwards is when it gets problematic. What if the appraisal doesn’t come in or there are whackadoo neighbors?”


Home buyers in real life typically have contingency periods when they can bring in inspectors, have the property appraised and potentially walk away if issues like termites or foundation problems pop up. Buyers rarely back out on a reality TV show because that wouldn’t fit the format of the program or the viewer’s expectations for a happy ending.


Reality TV shows also diverge from real life in the way properties are presented. Thanks to home-selling shows like HGTV’s “Designed to Sell” and “Get It Sold,” terms like “curb appeal” and “staging” have entered many consumers’ lexicons. “Not all the homes are staged on the shows, but it does set an expectation that they’re clean and well-lit,” Chan says. “In regular, real-life showings, babies might be crying or peoples’ laundry might be hanging in the background. It does put pressure on sellers to up their game.”


In that regard, some reality TV can serve as a wake-up call for sellers, especially those whose homes have been sitting on the market. “They can learn that you need to clean out your house, you need to paint it,” says Janice Leis, an associate broker who handles properties in Pennsylvania, Florida and New Jersey. “The outside needs to be cleaned up, and you need to take furniture out. It shows sellers what’s important to the masses of people that are out there looking.”

Another key aspect of homebuying shows is when buyers list their needs and wants. Leis says this is helpful for first-time buyers who gain tips from watching the programs. “[The shows are] excellent in discussing [homebuyers’] expectations, limitations and the pre-approval process, which is something I’ve always made people do from day one,” Leis says.


Despite the condensed nature of reality TV shows, Chan says he believes they still offer useful information. “Before the proliferation of reality TV, your only information as a consumer was what your real estate agent was telling you and friend’s anecdotal experience,” he says. “The real estate reality shows are almost like a mini course: Ask about the foundation, or this is how to act at an open house.”


The shows also depict the compromises homebuyers make in real life.


“The good thing is that you see the pros and cons of the house that they end up buying,” Chain says. “They film them talking about the trade-offs. Those are very real conversations that people have. Usually by the end of the show, someone makes a compromise because there’s no perfect house.”

Article Source: http://money.usnews.com/money/personal-finance/articles/2013/05/13/real-estate-reality-tv-shows-fact-vs-fiction?page=2

Real Estate Matters: Low mortgage rates are an opportunity

What does it say about our economy that mortgage interest rates are near their lowest point since 1971?

Do you remember where you were in 1971? That year, the U.S. had come off the highest inflationary year since the Korean War started, and as the year continued, inflation rose, taxes increased and so did the unemployment rate.

In August, then-President Richard Nixon announced a freeze on all prices and wages in the United States. “The time has come for decisive action, action that will break the vicious circle of spiraling prices and costs,” he said. “I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days. I am relying on the voluntary cooperation of all Americans, each one of you — workers, employers, consumers — to make this freeze work. Working together, we will break the back of inflation.”

President Nixon thought he had found a way out. But by 1973, thanks to the oil embargo, the U.S. was deep into a tough recession that lasted until 1975 and featured stagflation, a combination of high unemployment and high inflation.

This time, our economic malaise looks a lot different. We have had extremely high unemployment but low inflation. For a while, some economists were warning of possible deflation, when prices go down instead of up.

Our unemployment rate is dropping, but that seems to be because so many people have thrown up their hands and left the job market permanently. The labor participation rate is at the lowest point in several decades, with some 3 million fewer Americans employed than before the recession began in 2007. About 12 million Americans are out of work, nearly half for six months or longer.

Millions of Americans have refinanced their mortgages, freeing up anywhere from $200 to $750 per month. That money has gone back into the economy, and is quite possibly the only thing keeping the U.S. from slipping back into recession, even as the economies of Europe are seeing unemployment rates as high as 27 percent (Spain) and recessions that are now seven quarters long.

The Federal Reserve Bank announced it intends to keep buying mortgage backed securities at roughly $85 billion per month, and will increase that amount if inflation and unemployment rates do not hit their targets.

What does this mean to you? If you haven’t refinanced, go out and bag a great loan at a great price. If you’re thinking about moving and need a different or bigger home for your growing family, go for it because your dollars will go further. And if you want to buy investment property, we’re at the end of the best time in a generation, since the country’s bankers have now worked through more than half of all foreclosures and prices appear to be rising.

While mortgage rates may bounce along at the bottom, there’s an intention to keep them this low, or nearly this low, for an extended period of time — at least through 2013. What happens after that is anyone’s guess.


Article Source: http://www.washingtonpost.com/blogs/where-we-live/wp/2013/05/14/real-estate-matters-low-mortgage-rates-are-an-opportunity/


Investing In Real Estate For Beginners – Lease Options

The number one real estate investing question I’m asked is; “How can I get started in real estate investing?” Often this question is appended with personal obstacles that many investors face, like – “I’ve never invested before…” – “I don’t have the greatest credit…” – “I filed bankruptcy…” – “I don’t have the money to invest” – Here I’ll provide you several ways to get your real estate investing career started, successfully.

Remember this: All investors, successful and unsuccessful, start somewhere. Few people, if any, start with the knowledge, money, credit, or experience needed to be an investor. All investors, my self included, faced – and continue to face – obstacles on our real estate investing journeys – obstacles are temporary – if you have a definite goal in mind.

Now is the perfect time to get started. Real estate investing goes through cycles. Unfortunately, many people start a real estate investing career at the top of the cycle. When prices are at or close to the highest they will be in the cycle. That’s the buy high, sell low strategy. That is how most people fail as investors.

Starting a real estate investing career today means you get in near the bottom of the cycle. The buy low, sell high strategy. I think you’ll agree this is the strategy you want to follow.

I said “near the bottom” because we turned the corner several months ago. I’ve been blogging that it’s time to start a real estate investing career since the market started heading back up. I don’t have a crystal ball. I don’t know how long the market will prosper. Most cycles take years to reach the top. What I do know is this cycle is the opportunity of a lifetime. You’ll never see prices this low again. But you need to jump in now to take advantage.

There will never be a better time to begin your real estate investing career than today.

Get a Real Estate Investing Education

There are many ways to educate yourself about real estate investing. One is buying several of the hundreds and hundreds of books that have been written on the subject. Another is reading blogs just like this one. Use free information to learn the key concepts and strategies for real estate investing. There are dozens of strategies. If nothing else, real estate investing is about getting creative. Once you find a couple of strategies you find interesting, you can pick up a couple of books on those specific subjects to learn the in-depth details.

Working with a mentor is another way of getting your real estate investing education. A mentor is the fastest way because you quickly become immersed in the subject. You don’t bounce around trying to sort out the details yourself. Your mentor keeps you pointed in the right direction at all times. Even with a mentor, you have options. You can participate in group seminars or work one on one with a mentor. Keep in mind that mentors have specific strategies they follow.

Personally, I have a broad knowledge and understanding about real estate investing because I’ve been at it for decades. However, I specialize in lease options and subject to existing financing deals. The reason is that these two strategies allow me to control more properties with less of my money in the deals. In today’s market, this is an ideal strategy.

My strong recommendation is that you do a little free research to find a mentor that follows a strategy that you believe in and then contact the mentor about coaching options.

Basic Real Estate Investing Strategies – Lease Options and Other Strategies

Since your first step in real estate investing is deciding on a strategy, let’s look at some broad categories of real estate investing strategies:

  1. Residential real estate
  2. Commercial real estate
  3. Buy and hold
  4. Flipping
  5. Wholesaling

Residential Real Estate

Many people start their real estate investing career in the residential sector for two good reasons. Most people have a decent understanding about how the residential sector works. That dramatically shortens the learning curve. Still, residential investing is different than owning your own home. You still need an education in residential real estate investing before you jump in. The other reason people begin in residential is because the cost to get started is much lower than commercial real estate. The barrier to entry is lower.

Commercial Real Estate

On the other hand, commercial real estate is more profitable, traditionally. You’ll definitely pay more for a strip mall than you will for a single house or duplex. However, you’ll have more income streams coming in each month. Also, businesses sign multiyear leases rather than the one-year lease that is standard with residential houses. Once a business is successful at a commercial location, they don’t want to leave. Businesses stay for decades. Low turn over and reliable monthly rents are what you can expect.

Multiple Strategies For Commercial and Residential Real Estate

In both the residential and commercial categories you have multiple strategies to pick from. Buy and hold is the most common strategy. You buy the property, rent is out, and hold it while the value appreciates. Over the years, you work at accumulating as many properties as possible to create multiple income streams. Eventually, you begin looking at which ones are performing the best. Those delivering the least profit are sold of to reinvest the capital in better performing properties.

Commercial real estate investing requires that you pick a niche within the broad category. Owning retail space is different from owning manufacturing space which is different from owning a hotel. You can buy and hold commercial real estate much the same way you do residential but you need to further specialize.

Flipping properties has become more popular the past 10 or 15 years. This is when you buy a property but you don’t intend to hold it long term. If you buy it at a deep discount, you can quickly flip it to an end buyer for a quick profit. Another flipping strategy is to buy the property and rehab it to increase the value before selling for a profit. You can flip both residential and commercial properties.

Investing In Real Estate With Little Or No Money? Wholesaling Lease Options

Wholesaling is another investing strategy using lease options. This is a strategy where many people on a shoestring budget begin their real estate investing career. There are ways of wholesaling properties without you having to invest any of your own money. You just take a piece of the action buy finding deals other investors are looking for and hanging them pay you a commission. One way this works is you find houses for investors that rehab and flip houses. They are busy remodeling the house they currently own and want another property ready to go as soon as they finish. Most wholesalers eventually put enough profit aside to begin investing their own money after learning the ropes inexpensively.

This is just scraping the surface of what your “options” are in real estate! This information is a good springboard to explore Lease Option investing strategies, and choosing niches that are suitable for you – based on your investing experience and resources. The good news is, there’s room in real estate – and especially in lease options – for everyone to get started, despite experience level and access to capital


Article Source: http://www.nuwireinvestor.com/articles/investing-in-real-estate-for-beginners—lease-options-60772.aspx