There are two ways of earning from your real estate investment: sell it at a higher price, or rent or lease it out. Finding possible tenants are not that different from finding buyers for your home-you place ads, distribute flyers, arrange appointments (or open houses) so they can view the property, and negotiate for terms.
The obvious advantage of renting out the property is that you earn money while still retaining ownership. But it does have its own share of headaches-like the occasional tenants-from-hell who either skips on monthly payments or damages it during his stay. Of course you could always kick them out, but you’ve already incurred losses: the cost of repairing the property, the earning opportunities lost while finding another tenant, and the devaluation of the property because of the damage.
That’s why it’s very important to screen your tenants through the rental application form. It includes all the information you need to do a background check, evaluate their ability to pay, and even track them down in case he trashes your beloved apartment and skip town before you find out.
Once you’ve found your best candidate, you also need to protect yourself (and him!) with a residential lease agreement. This basically outlines the terms in which he can use the property, his obligations (and yours), and any rules on damage and repair. It also has a description of the property-so you never end up fighting over whether or not the bathroom tiles were cracked before or after he moved in-and your policy on subletting.
In other words, the residential lease prevents the ugly squabbles that often occur between tenants and landlords. What if the dog ruins the carpet? What if the roof leaks or the cabinet door falls off? What if he abandons the property? What if he misses a payment? Better clear it now, than argue about it later on.
May 14th, 2007
Property flipping may not be for everyone. Sure, it’s tempting to get into the trend especially when everyone who’s been successful would say it’s a great way to earn quick money. But then again, some people believe that money earned quickly also vanishes like a bubble. So if getting quick buck is your only goal, better think many times before you try property flipping.
Not all people who’ve been successful in flipping homes have remained long in this kind of business. Some only had their days of euphoria for a short time while those who weren’t careful enough also experienced money troubles in their personal lives.
If you’re contemplating on trying it out, just remember that you need to study the housing market in your area. If home prices in your area are fast appreciating, good for you because you can make good money. However, in areas where the housing market is cooling, you really have to know your market.
To be successful in flipping homes, learn more about the experiences of other flippers including those who made it big and those who were not lucky enough. You need to avoid the mistakes they’ve made in order for you to reap good profits. Here are some common mistakes to avoid.
1. Financing the whole property through your personal funds. Keep in mind that using your own private money will not always guarantee big profits for any home that you flip. It’s best that you apply for loans to use in your home flipping venture.
2. Rushing things is never good for any endeavor. What you should do then is to decide everything including how you are going to proceed before you purchase a property you are planning to flip. Good planning helps.
3. Keeping the property for too long. Do remember that house flipping gives the best profits when the home concerned is resold at the shortest possible time. The longer you hold the property, the more costs you are accumulating.
4. Setting the selling price before buying the property. You should know that the housing market is never constant. Home prices fluctuate from time to time so avoid holding a fixed price for long before deciding to drop it. If your property is in a hot market, you can get a good price without even negotiating.
5. Paying too much for the house. Sometimes, home owners who need to sell their property quickly may still ask for financial assistance from their buyers. Some home flippers who are too eager to flip the house, in turn, are tempted to help the owners at their own expense.
6. Not having enough cash. You need to have your own money to pay for the monthly mortgage of the house you’re flipping. If you’ve spent your funds in renovating the home, you’re likely to encounter financial and credit troubles.
7. Quitting your job. Home flipping won’t guarantee you regular income. It might give you huge profits but then, it’s not always that you will earn the big buck quickly. It’s still best if you have a regular job that can provide you regular income for you and your family.
8. Hiring an unlicensed contractor. Before you have the house renovated, always check if the contractor you got is licensed. Otherwise, you will just be spending more for the work.
9. Not inspecting the house before buying. When buying a home, even if you’re not planning to live in it, make it a point to personally check the interior and exterior to see what repairs are needed.
10. Underestimating renovation costs. If you’re not sure about the repairs to be done, have someone you know estimate the costs together with you. Avoid doing all the work yourself. Two heads are better than one, remember?
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May 14th, 2007
Think about These Carrots When Buying a Home
No matter what you do, there will always be a lot of things to think about, a lot of issues to consider, and a lot of matters out of your control when buying a home. You’ve surely asked yourself why do I need a home appraisal? What does that do for me when I want to buy a home? You want to know? We’ll tell you, just keep reading.
Get the Right Stuff When You’re Buying a Home
When you need a mortgage for your home buying needs from a bank, credit union or lending company, it is more than likely that the lender will want and need a home appraisal before you get any money to buy that home. From the perspective of the lending company, they want to know that if you stop paying your mortgage, they will be able to sell the home and get their money back. The home appraisal will give a baseline price of what the property is worth, and be able to tell you what it should be sold for on today’s market.
Are Comparative Market Analysis and an Appraisal the Same Thing When Buying a Home?
Although the results will be complimentary to each other, they are not the same thing. A home appraisal will tell you the approximate market value of the home you’re interested in buying, but a comparative market analysis will compare your the home to usually three other similar homes. Based on the comparison, you will have a better idea of where the home you’re interested in lies in the grand scheme of things. Also, a comparative market analysis is completed by a real estate agent, whereas an appraisal is completed by a registered appraiser.
May 3rd, 2007