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Why You Should Consider Buying Rental Property In College Areas

As an investor, you’re always looking for the next big opportunity. For many savvy real estate investors, this means buying properties near college campuses. While this may sound like a bigger risk than reward, there are actually some really good reasons to buy and then rent properties in college areas. Check them out!

1. You Don’t Have to Work So Hard to Market Your Property

The sheer nature of a college town sells itself. With high walkability ratings, these towns are full of restaurants, entertainment, and shopping. Finding renters in a college town is really easy because there’s always an abundance of people hoping to find housing close to the school and all the activity.

2. There’s No Shortage of Potential Renters

Many students relocate when they enter college. A good majority of them come from far away, which means they need somewhere to live while they attend school. Renting is the obvious option since most of these students will either return home or move away after graduation. Even if a renter moves out of your unit, there’s always another waiting to move in immediately.

Aside from the student body, there’s also the school’s staff and faculty, as well as graduate students. While many of these people are longer-term residents, they may still prefer to rent rather than buy.

3. You Can Maintain Competitive Rental Rates

Because there’s such a high demand to live in the area, you can set and maintain competitive rental rates that keep up with the going market value.

4. Vacancy Rates are Low

Renting in a college area is a balancing act because vacancy rates tend to climb during the summer months when students return home for the break. You can avoid this pitfall of renting to college students by making them sign a year-long lease. This obligates your renters to year-round occupancy, so you don’t have to worry about vacancies during the offseason.

The Risks of Buying Property in a College Town

As with any investment, there are risks to be aware of when buying property in a college town.

1. College Students are Notorious for Causing Property Damage

While renting in a college town has many benefits, no landlord is immune to the property damage college students almost always cause while living in a rental unit. You can offset this damage by factoring it into the security deposit you require when they sign a lease.

2. You May Have to Dedicate More Time to Finding Renters

College students move around a lot, so you may have to spend more time looking for new renters than you would in another area. The good news is, there’s usually no shortage of prospective tenants waiting to rent your property.

3. It Can Be Difficult Finding Renters for the Summer Months

As stated before, summertime tends to result in more vacancies as students return home for the break. Having tenants sign a year-long lease solves the problem of seasonal vacancies in a college area.

4. College Students Can Be Demanding

Because they’ve never lived away from home before, college students tend to have a lot of questions and be quite demanding when it comes to needing something. It’s easiest if you live nearby so you can address their needs quickly, or if you can’t live nearby, hire a reputable management company to handle all the landlord responsibilities in your place.

If you’re an investor looking to increase your earning potential, consider buying rental property in college areas. While there are some risks involved, there are ways around them to make investing in college town real estate a smart move.

3 Types Of Real Estate Properties You Can Invest In

Real estate properties come in all shapes and sizes, each with their own special features and unique structures. For the experienced real estate investor, the differences between them are integral to his money-making venture. For the beginning investor, however, these differences may not seem so important. For this investor, we discuss the three types of real estate properties you can invest in below.

Vacant Or Unoccupied Property

Vacant and unoccupied properties are typically found on the outskirts of town, in rural areas, and sometimes, in the city itself. Examples of these types of properties include farmland, orchards, timberlands, and ranches.

From a price standpoint, vacant and unoccupied lands are often more expensive than other types of real estate properties. They vary so greatly in size that it’s difficult to estimate a general price range. For an up-and-coming real estate investor, however, purchasing such a property is a great way to make a profit while gaining more contacts and experience.

Residential Properties

Residential properties are any that serve as homes to people. These properties include duplexes, apartment complexes, condominiums, and single-family homes. These examples vary greatly in structure and market value, which means many investors choose to deal with just one or two types, depending on location. Furthermore, many real estate investors prefer investing in residential properties over other types because there are always plenty of potential tenants waiting to rent their units.

Commercial Properties

Commercial properties are those where commerce and/or business takes place. However, they can also be sites where business and commerce are meant to take place such as empty lots, shopping malls, parking structures, etc. Industrial properties are often commercial properties, too, although it is less common. Investors looking to deal in commercial properties need to know the property’s history for generating a profit, as well as it’s potential to keep making a profit.

How Should You Handle Your Real Estate Investments?

Aside from deciding which type of property to invest in, you also need to figure out how you’ll handle the properties you buy. Renting out your properties is the fastest and easiest way to see a return on your investment. However, it also requires more of your time.

As a rental property owner, you have two options: manage the property yourself or pay someone to do it for you. The latter frees up your time but costs you more. Doing it yourself demands a great deal of your time, but if you don’t mind, it allows you to keep more of your profits.

Another way to invest in real estate is to buy, fix, and sell properties at a profit. Again, you can opt to do some or all of the work yourself to save money, but many investors hire contractors to complete repairs and renovations. This option requires a greater cost up front but requires less of a commitment over time.

Whichever type of property you decide to invest in, and how you decide to manage it is a personal preference, but ultimately, real estate investing is a great way to make the kind of money that allows you to do the things you want and to retire comfortably. Commercial properties, residential properties, and vacant land each offer good investment options for real estate investors.

6 Risks Every Real Estate Investor Should Be Aware Of

When it comes to real estate investing, there is always a certain amount of risk involved.

Here are six risk factors of real estate investing that every investor should be aware of.

1. Market Risks

Every market ebbs and flows depending on the current market trends. Interest rates, the economy, inflation, etc. all have a part in the ups and downs of the real estate market. While no investor can control the market, he can strategize based on market conditions and build a diversified portfolio.

2. Asset-Level Risk

As a general rule, the less risky an investment, the less return it delivers. In real estate, the same holds true. For example, there’s always a need for apartments regardless of the economy. This makes multi-family dwellings a low-risk venture and also a low-yielding one as well. On the other hand, hotels that rely on seasonal traffic and tourism are a much higher-risk investment.

3. Idiosyncratic Risks

Idiosyncratic risks are risks that are specific to a particular property. For example, construction of any kind (renovations, repairs, new constructions) add risk to a real estate investment because they usually halt rent payments during that time. Other idiosyncratic risks include things like not being able to acquire the proper permits, environmental risks such as soil contamination, and budget overruns.

Another idiosyncratic risk has to do with the location of a property. For example, in Chicago, owners of buildings behind Wrigley Field lost big when a new scoreboard was erected, blocking the view of the field and halting private rooftop parties during the games.

4. Liquidity Risks

Being able to get out from under an investment easily is something every investor should consider before buying any property. In markets such as Houston, dozens of investors may throw their hats into the ring hoping to buy your property, regardless of the market. In Indiana, however, fewer investors may be interested in taking that property off your hands. While this means less competition in buying property, it also makes it more difficult to get out of an investment, too.

5. Credit Risk

Having a credit-worthy renter doesn’t mean your investment is a sure-fire money maker. Even the biggest name renters can go bankrupt, leaving you in the lurch. Overall, the more stable a property’s income stream, the more investors are willing to pay for the security. Don’t let this fool you into thinking that you will always have a steady and reliable income, however.

6. Replacement Cost Risk

Demand is a powerful motivator. As lease rates climb in older properties due to an increase in demand for space, it stands to reason that someone will come along and build new buildings to accommodate that demand. If you can’t justify raising lease rates in your older property, you may lose tenants to the newer, better building and ultimately, lose your income stream.

4 Ways To Save For A Down Payment On An Investment Property

While many people are jumping on the real estate investing bandwagon – it’s a great way to increase your wealth – coming up with the required 20-percent down payment can be challenging. For many would-be investors, this is the part that stops them in their tracks.

If this is what’s keeping you from making your investing dreams come true, read on to discover four easy ways to save up for the down payment on your next investment property.

1. Use The 50/30/20 Rule

If you aren’t already tracking your spending, begin right away. You can’t start saving money until you know how much money you have going out each month. There are several budgeting apps out there, so find one that works for you.

Next, use the 50/30/20 rule to begin putting money aside. Spend 50 percent of your income on mandatory expenses such as rent, student loans, etc.

Use 30 percent of your income for discretionary spending. This includes things like your Netflix subscription, gym membership, and any other entertainment you enjoy. A budgeting app can alert you when you get close to your 30-percent limit, so you know when to dial back your shopping habit.

Finally, put the last 20 percent of your income into a savings account and don’t touch it.

2. Develop A Timeline To Acquire The Property You Want

If you’ve decided you want to be the owner of an investment property worth $100,000 in two years’ time, figure out how much you’ll need to put aside each month to reach the $20,000 down payment amount and then get busy. Don’t forget about closing costs and contingency fees, which can be about 2 percent each. This means you’ll need to save about $1,000 a month for the next 24 months.

If this sounds crazy, consider extending the timeline to three years or beyond.

3. Automate Your Budget

You’re human, and as such, you cannot rely on willpower alone. You may start out with good intentions, but it’s too easy to succumb to spending more than your budget allows on things you enjoy. So, help yourself save for that investment property by automating as much of your budget as possible.

Set up fixed/mandatory bills to come out of your account on the same day. This way, you’ll be able to see exactly how much they are. Next, set up an automatic transfer of 20 percent of your income into an account designated especially for the down payment on an investment property. Anything left in your regular account is what you can spend on anything you want.

4. Get Rid Of Things That Don’t Add Value To Your Life

Take a look at your expenses and determine the things that don’t add much value to your life or the things you can do without. This might include magazine subscriptions or the highest cable TV package, for example. Cutting back or doing away with these “extra” expenses can help you put more money aside for that investment property you dream of.

4 Reasons Why You Should Invest In Multifamily Homes

Real estate offers a much more stable way of investing one’s money than other investment platforms. A big advantage of real estate investing is the fact that it allows you to make money in several ways. One way – buying multifamily homes – offers unique advantages over other types of real estate investing. While not for everyone, these advantages are definitely worth exploring. Here are four reasons you may want to consider investing in multifamily homes.

1. More Money Coming In

While multifamily homes may not be as good a return on your investment as single-family homes are, these properties almost always have a better cash flow. The reason is obvious – there are more tenants paying you rent each month.

2. It’s More Convenient

Multifamily dwellings only have one lawn, one roof, one HVAC unit, etc. Everything is in one place, making it easy (and probably cheaper) to maintain the property. If you own more than one single-family home, they are likely spread all over the place, and with each one having all of these things too, it’s easy to see how quickly expenses and time can add up when it’s time to maintain or repair them.

3. Vacancies Aren’t As Detrimental

Tenants move out. It’s the nature of the beast, but when they leave a multifamily property, there’s always the other tenants living in the other units that continue to pay rent each month. With single-family homes, however, vacancies can last a long time, costing you money. Another advantage to this point – it’s often easier to find new tenants for multifamily properties than it is for single-family homes.

4. You Can Live In One Of The Apartments

For first-time investors, this may be the biggest advantage of investing in multifamily homes. Living in one of the units, you can qualify for the same types of loans you’d get when purchasing a single-family home, making it less expensive overall. Secondly, living in one of the units allows you to count the rental income from the other units on your loan application, which might make it easier for you to acquire the property.

Multifamily home investing isn’t for everyone, but for many investors, it’s a great way to make money fast. If you’re thinking of investing in real estate, consider the advantages listed above as you figure out what type of property you want to invest in.

The 4 Types of Real Estate Investments and How They Differ

As a new real estate investor, you’re going to have to purchase property eventually. Which type of property you buy could set the course for your future as a real estate investor. While every investor has his or her own way of doing things (investment strategies), there are only four types of real estate investment properties to choose from.

Since each type of property generates profit in different ways, we discuss them below to help you figure out which may be a better fit for you.

1. Residential Real Estate

Residential real estate includes anything people can live in: single-family homes, apartments, condos, townhouses, etc. Often, investors purchase single-family homes and rent them out while they wait for them to increase in value. Other investors purchase multi-family properties to have multiple streams of income coming in. Many new investors get a start in residential real estate investing by purchasing a multi-family property, living in one of the units, and renting out the rest.

2. Commercial Real Estate

Commercial real estate includes any property that can be used for commercial purposes. This includes retail stores, restaurants, and office buildings. Owners of commercial real estate rent out the space(s) to business owners, who then pay a monthly fee to conduct their business there.

Commercial real estate investing isn’t as easy and straightforward as residential real estate. For starters, it’s much more expensive to get started and most banks won’t finance you unless you already have a signed lease from a tenant already occupying the property. Furthermore, your credit needs to be impeccable and down payments can be as much as 50 percent.

Having said all that, owning a successful commercial building can bring in much higher profits than owning residential properties.

3. Industrial Real Estate

Industrial real estate is any property used for warehousing, manufacturing, or distributing products. These properties are usually owned by highly skilled investors with very extensive/diverse portfolios who know the potential for huge profit when they see it.

Real estate investors like putting their money into industrial properties mainly because of their stability. The leases are usually longer and there’s less turnover as tenants don’t vacate this type of property as often as others.

4. Land Investments

Owning land can be a risky investment, however, if that land is located in an area that’s ripe for future development, it could pay off big.

The reason investing in land is risky is because raw land won’t generate income on its own. As the owner, you’re responsible for paying taxes on the property, dealing with zoning and environmental issues, and finding developers to turn it into something that will make money.

Unless you buy farmland, which can be rented out to farmers to plant, owning land often results in a loss rather than gain if you don’t know what you’re doing.

When it comes to real estate investing, it’s important you understand the different types of investment properties so you can determine which is a good fit for you. As a new investor, it’s a good idea to focus on just one type of investment and learn it well before trying to diversify your portfolio.

Real Estate Investing – When Should I Start?

There’s no doubt that real estate investing is a great way to make money and save for retirement. It’s never too late to begin investing, but in terms of real estate, the sooner you get started, the better. In fact, getting into real estate investing in your 20’s is a smart move.

When you buy a home rather than rent, you ultimately save money and set yourself up for the future with a valuable asset. When you purchase a piece of property and then rent it out, however, you not only have a valuable asset, but you also have a steady stream of income that pays the mortgage and gives you extra money to boot.

The Value Of Investing Early

Many real estate investors get an early start knowing the risk can pay off big. Although most 20-year-olds have a lot going on, it’s the perfect time to buy your first investment property. While it can be stressful, all it takes is one small and smart investment to be successful.

For example, one successful investor by the name of Henkel got his start in real estate investing after dropping out of college. At the age of 24, he bought a 5-bedroom house, rented out four of the rooms for $300 each, and lived in the last room himself. He basically lived for free while the incoming rent paid the mortgage. Eventually, he bought two more properties, and today, he is worth more than $4 million.

Securing A Loan In Your 20s

As a young person, it’s likely your credit score will be low thanks to a lack of credit. While this can negatively impact your interest rate, you can rest easy because, in general, interest rates have been low for the last several years anyway.

Another obstacle is the down payment. Most buyers are expected to put down at least 20 percent of the purchase price. Sometimes, a smaller down payment might be acceptable, but it might increase your interest rate.

One thing you will likely have going for you as a young buyer, though, is the fact that you qualify as a first-time homebuyer. Many lenders have programs for first-time homebuyers that lower the required down payment as well as the interest rate if you qualify.

The Bottom Line

Investing in real estate while you’re young gives you many advantages over other people your age. You’ll learn responsibility and patience – both of which will help you in many areas throughout your life. After all, being a real estate investor requires you to make sound financial decisions based on research. Real estate investing is not a get-rich-quick scheme, so being patient is key.

When you buy your first investment property in your 20s, you are setting yourself up to live a financially worry-free life. You’ll be able to afford the things you want as well as be able to put money away for a comfortable retirement. While it’s never too late to get started in real estate investing, the sooner you make your first property purchase, the better.

6 Ways To Screen Tenants To Increase Your Rental Business

One of the most important things you can do as a landlord is select the right tenants. The right tenants help ensure the success of your rental business because they keep your property in good shape, follow the rules, pay rent on time, and get along well with the neighbors. Choose the wrong tenants and you could be setting yourself up for a big loss.

With careful scrutiny in a few key areas, your chances of selecting a good tenant go way up. Below are several ways to screen tenants to increase your rental business.

1. Get To Know A Prospective Tenant

Take time to meet with a prospective tenant in person. This gives you the opportunity to ask important questions like “Do you have any pets?” “How big is your family?” “What is your rental history like?” and “What are your preferences when it comes to the neighborhood?”

Try to learn as much as you can about the tenant to help you make an informed decision without coming off as intrusive. Getting too personal can cause you to lose a good tenant altogether.

2. Contact Previous Landlords

While it’s tempting to skip this step, it’s important you contact previous landlords to get a clear picture of a prospective tenant’s likelihood to pay rent consistently. If a previous landlord tells you the tenant didn’t pay rent on time, or missed rent payments altogether, there’s a good chance he will repeat this behavior as your tenant.

3. Check Credit Reports

Anytime you screen a potential tenant, it’s a good idea to check their credit report. Look at the credit score but focus more so on the area that tells you how many times he or she has been late with payments or has missed payments completely. Periodic lapses shouldn’t concern you, but if the person has been consistently late or has ignored several bills, it’s a good indication he or she won’t make rent payments consistently either.

4. Always Verify Income

Just because someone tells you they can afford the rent doesn’t mean they really can. Always ask about employment and verify with the employer that the person actually works there and makes as much as he says. A good income level is somewhere in the ballpark of three times the amount of the monthly rent.

5. Collect A Security Deposit

No matter who you rent to, it’s always a good idea to collect a security deposit. You might be renting to the most responsible people on the planet, but accidents do happen. You can cover the cost of most incidents by collecting at least the equivalent of one month’s rent, which you can return after the tenant moves out and leaves the property in tip-top shape.

6. Consider Checking Criminal Records

While it’s against the law to discriminate against someone with a criminal record, you can choose to not rent to certain people, especially if they act sketchy or give you a bad feeling. It’s easy enough to check anyone’s criminal record at the county or state courthouses using the person’s name and date of birth. Having said that, it’s crucial you understand the laws in your area concerning renting to people with prior criminal records.

You can check all the facts available to you, but in the end, it’s your own instincts that you should rely on. If a tenant looks good on paper but gives you an odd feeling, it’s a good indication that he isn’t the right tenant for you. Trust your instincts and use the six ways to screen tenants to increase your rental business above to ensure you rent to the right person.

New Lakefront Resort Closer To Reality In Vernon

On a sunny Vernon morning you pick up coffee from your new favourite café to drink as you stroll along boardwalks that meander through a flow of natural wetlands and creeks. Your destination is the new Okanagan Lake beach that gives you stunning views of nearby mountains. At lunch time you visit the new restaurant in the beach-side resort The Port Okanagan.

Third Reading Approval

Having now passed the third reading at a recent Vernon City Council meeting and obtaining re-zoning approval, The Port Okanagan is much closer to a reality. Not only will it include the lakeside resort but will contain a mix of residential and commercial spaces. Located on 16 acres on Lakeshore Drive adjacent to Lakeshore Park and Beach, this development will retain 7 acres of wetlands, creeks and other existing natural features.

The Residences

Nestled among the beauty will be a mix of residences – private condominiums, rental apartments and vacation condominiums – that will have views of the surrounding lake, mountains and wetlands. Most residential buildings may also include private pools and other amenities.

The Storefronts

Commercial storefronts will be situated on pedestrian orientated shopping streets and interconnected via boardwalks that lead to the resort.  These wooden boardwalks will have with several locations to sit and enjoy the natural wetlands and tranquil setting. The public will have access to the lakeshore, parks, streets and businesses.

The High-end Resort

The high-end resort itself will be 4 to 4.5 star, contain a parkade and a 400 to 500-person conference centre. Amenities for its approximately 110 rooms and suites will include a dine-in restaurant, pool and spa, and beach access. Named “The Port” in honor of the site’s history as a hub where roads, rail and ships met to transfer people to the paddle wheelers that sailed Okanagan Lake. This development promises to continue that tradition, with residents, store owners and visitors all converging in a stunning natural setting.

Easy Ways To Find Apartments Online

Gone are the days of apartment hunting in the newspaper with a red marker in one hand and a cup of coffee in the other. Today’s apartment hunting is much more efficient and streamlined, thanks to the Internet. It’s possible to find dozens of rental opportunities at any given time with a simple online search, but as with any online transaction, you have to proceed with caution. Here are some easy ways to find apartments online, and the things you need to know when doing so.

Finding Apartments Online is Easy When You Know Where to Start

Before you head to your computer and begin searching randomly for apartments in your desired location, it’s important that you do a little “real-world” research first. By this we mean, find out what the average rent payment is in the area you want to move to. Take some time to learn a little bit about the neighborhood you’d like to live. Find out if apartments in this area meet your minimum requirements in size, locale, and anything else that’s important to you. You may find that what you were considering really isn’t what you want before you even start.

Once you have all this information, you can begin your online search knowing you have everything you need to make a wise, informed decision.

Search Filters Help You Find Exactly What You’re Looking For

Most online apartment rental websites give you multiple search filters to narrow down the type of apartment you’re looking for. For instance, if you’re looking for a two-bedroom unit that rents for under $1000 a month, you can enter these parameters to weed out apartments that don’t fit the bill.

Utilize these search parameters as much as possible to avoid wasting time with apartments that don’t meet your requirements. Be sure to begin with the things you must have before narrowing the search results down even further with features that aren’t as important.

Online Apartment Hunting Can Be Risky

Every online transaction carries a fair amount of risk. Scammers are everywhere, and unfortunately, they prey on apartment hunters, too. That being said, it’s important that you don’t complete the entire rental process online. When you find a place you like, go out and have a look at it for yourself. What you see online isn’t always what you get in real life. If you aren’t able to go physically to see it, make the extra effort to research the property and the property owner online before committing to anything. Ideally, no money should ever pass hands until you’ve had a chance to see the rental unit inside and out.

You Can Avoid Being Scammed

It’s not always easy to tell if someone is trying to scam you, but there are tell-tale signs to look for when they are. If a landlord or apartment manager is trying to rush the application process or is purposely skipping over important aspects of the rental agreement, there’s a good chance they are skipping over other vital information as well. If an apartment sounds too good to be true, it probably is and you should walk away. The bottom line is if you get a bad feeling when dealing with a landlord or when looking at an apartment, follow your gut and look for something else.

Finding apartments online can really save you time and broaden your horizons in terms of what’s available in your area. Hunting apartments this way, however, does carry risks that you need to be aware of. Following the tips above gives you easy ways to find apartments online.

5 Things You Should Consider Before Buying A Rental Home

Should you purchase a rental home that’s been previously occupied by tenants? This is a big decision because it could turn out to be a dream investment or a nightmare. It’s important that you take the time to consider a few things before jumping in with both feet. Below is a list of several things to think about while looking at whether to invest in a rental property or not.

1. What Is The Condition Of The Home?

Sinking your money into a rental property is a big deal, so you need to check the condition of it carefully before buying it. You’ll find that some rental properties are poorly maintained, while others are not. Some tenants treat a rental as their home and will make small enhancements such as planting flowers, applying a fresh coat of paint, or adding new appliances. On the other hand, if a property has been rented by multiple tenants, or it has sat unoccupied for a while, problems are bound to exist. Be sure to check the property inside and out to make sure it’s worth buying.

2. Can You Tour The Property When The Tenants Aren’t Home?

The best time to walk around the property and look for potential problems is when the tenants aren’t home. This way, you can look inside cabinets, under rugs, and behind furniture to inspect the home thoroughly. Be sure to check inside and outside the property before finalizing the deal. You should be able to see easily how well the property has been maintained.

3. What’s The Neighborhood Like?

The surrounding neighborhood is an important factor in whether you should buy a rental property or not. Look at the other houses in the area. Are they single-family rentals or multiple-unit rentals? What about any shared amenities in the area? Are the parks clean, and the parking lots well-lit? Checking these things will help you determine whether you want to buy a property in that neighborhood or not.

4. How Long Has The Rental Remained Unoccupied?

While a rental that’s unoccupied at the time you buy it is much more convenient for you, it could signal major issues with the property. There’s a reason a rental remains unoccupied for a long period of time, and it’s usually because it needs major repairs. Check for things like a leaky roof, broken pipes, and pest infestation before sealing the deal on an unoccupied rental.

5. Who Will Manage The Property?

Managing a rental property is a lot of work. If this is your first one, you probably have enough time to manage it yourself. However, if you find it difficult to handle all the duties of being a landlord in addition to everything else you must do, you might want to consider hiring a property management company. While doing so cuts into your profits, it’s worth the fee (up to 10 percent of the monthly rent collected) to not have to worry about it.

Buying a rental property is a huge undertaking that could be the best investment you’ve ever made, or it could be the worst. Doing your homework and making sure everything checks out before buying ensures you don’t end up making a bad investment. Use the five things you should consider before buying a rental home above as a guide to making an informed decision.

4 Things To Avoid When Buying A Second Home

If you dream of having a vacation home – your own private getaway – you’re not alone. Many people dream of buying a second home, but few realize what’s actually involved in doing so. There are several things you should be aware of, and a few more to avoid. Most lenders consider giving financing for a second home riskier and might be less flexible with their terms than if it were a first mortgage. Let’s take a look at four things you should avoid when buying a second home.

1. Avoid limitations. Know your financing options.

There is a big difference in buying a second home and buying an investment property. Many new buyers do not know this. For instance, financing for a second home may only require a 10 percent down payment with a conventional loan, whereas financing for an investment property might require anywhere from 15 to 25 percent down, depending on the number of units on the property.

Something else inexperienced buyers do not realize is that there are options available for financing. You don’t have to take the first loan that comes along. In fact, there are even options for buying a second home with little to no money down. It pays to do your homework and shop around for the best deal. Never settle.

2. Avoid being unprepared. Plan for expenses upfront.

Since you already own one home, you have a good idea of the expenses you’ll incur buying a second home. While building equity in the second home is a good thing, if paying for the property leaves you broke each month, you might be better off waiting until your first mortgage is paid off. When purchasing a second home, you can expect the following expenses.
  • Utilities
  • Property taxes
  • Maintenance
  • Insurance

3. Don’t miss the moneymaking aspect of owning a second home.

Owning a second home means you won’t be spending all your time there. It’s your second home, not your primary residence, so there’s a good chance it will sit empty most of the time. Rather than let it sit empty, why not rent it out when you’re not there to help pay the mortgage payment and property taxes throughout the year? What’s even better is that renting your second home out for part of the year gives you the opportunity to deduct some of its overhead costs including mortgage interest and maintenance.

4. Don’t pass up the chance to have your true dream vacation home.

One person’s idea of a dream vacation home isn’t someone else’s. Avoid missing your chance at the vacation home of your dreams by considering a fixer-upper. The beauty behind a fixer-upper is that you can make it your own with renovations and upgrades to suit your own tastes. Homes that need work or updating often carry a much lower purchase price than finished, modern ones. You’ll get a better deal, and get the dream home you’ve always wanted.

One word of caution here: be sure to have a home inspection done before buying. This will let you know what you’re getting into, and how much time it will take to fix it up. Also consider checking homeowners’ association rules and local zoning laws to make sure you can do what you want to make the house your own.

5 Things Beginners Should Consider When Investing In Rental Properties

Buying a rental property could prove more challenging than buying a home for yourself. This is because you’re not just looking for a lovely home, you’re looking for a piece of property that’s going to bring in profit. The property you choose needs to attract the right kind of tenants and bring in a monthly rent that covers your costs and reaps a profit as well.

Being smart and not jumping into the first rental property you see is key to finding one that meets all the requirements listed above. The tips below will help you find the perfect profitable rental property.

1. Do A Thorough Search

The perfect property that meets all your requirements does exist, so don’t get discouraged when an initial search turns up less-than-desirable properties. You can hire a property consultant to search available rentals but try to do some of the searching yourself, so you learn the market well. Don’t be so quick to jump on a property just because your consultant says it’s the right one. Trust your instincts and use your own judgment when considering a deal.

2. Location Is Everything

When buying a rental property, its location is everything. Don’t buy a rental that’s located in a high-crime area – no one wants to live like that. Look for a community with a quality school system and try to choose a property that’s close to an abundance of work opportunities. Lastly, a property close to amenities like parks, entertainment, and public transportation tends to attract plenty of prospective tenants.

3. Pay Attention To Supply And Demand

Check rental listings in a given area to determine the supply and demand ratio for rentals in that area. If there is a high demand for rentals, it could be a seasonal thing that could leave you at a loss during off-season months. If there is an unusually high number of rentals available, the competition could cause landlords to lower their monthly rents to attract tenants.

4. Know The Going Rate For Rent In The Area

Find out what the going rate for rent is in the area you’re looking to buy. Is this amount enough to cover all your costs plus give you a profit? If not, continue searching.

5. Know What The Future Holds For The Area

Before deciding on a rental property, visit the Municipal Planning Department to find out if any major developments are in the works. New shopping malls, parks, and other amenities will attract prospective tenants to the area. Be leery of condos and other mass rental properties on the horizon, however, as they may be stiff competition in the future.

If you are thinking of getting into rental property investing, be sure to consider the tips above as you begin searching for a property. Remember, the right property is out there. You just have to know what you’re looking for and how to find it.

4 Reasons Why Permits Are Necessary When Remodelling Your Home

Many homeowners spend a great deal of time and money remodeling their homes. From adding a coat of fresh paint to the walls to tearing out a wall to open up a room, remodeling takes many forms. While renovating tends to add value and beauty to a home, doing so without the proper permits can be devastating. According to a recent study, of every 100 homeowners who make renovations to their homes, only 10-20 percent actually acquire the proper permits to make those renovations. Many people think minor remodels don’t need permits, but the reality is, even just adding a light switch could require permission first.

Types Of Renovations That Require Permits

Anytime you make any structural changes to your home, you need a permit. In fact, you may need to acquire multiple permits for one project. No remodeling project is too small when it comes to needing permits. Kitchen, bathroom, and additions definitely need permission, but even small modifications such as installing new windows, replacing a tub surround, or even adding additional electrical outlets require a permit.

Why Permits Are Necessary

Before starting any remodeling project in your home, it’s best to acquire the proper permits. If you aren’t sure if the project needs a permit, contact the city where you live to ask. In terms of building permits and home remodels, it’s better to be safe than sorry. Here are the four main reasons building permits are necessary.

1. Permits Help Ensure The Safety Of Your House

Whether you do the work yourself or you hire a contractor to complete the renovations, it’s possible that some parts of the job won’t get done correctly. When you acquire a permit, it includes a list of specific do’s and don’ts to follow as you work to ensure the safety and accuracy of the job. The permit will also have safety guidelines to follow and what to do if certain situations occur.

2. Homeowner’s Insurance Doesn’t Cover Renovations Made Without A Permit

If a mishap occurs while renovations are being made, or if something happens to the home because of a remodel, an insurance adjuster will probably ask if you have the proper permits for the remodel. When you tell him that you don’t, it’s likely that the insurance company will deny your claim to cover the damages.

3. Permits Ensure A Smooth Sale

If you ever have to sell your home after making renovations, you’ll be asked to divulge any information about the home that may be important. You’ll have to include the fact that you made modifications, which will likely trigger a home inspection. When the inspector comes in, he or she will need to know that all renovations were done correctly and if those renovations included things like hanging drywall or installing electrical wiring in the walls. It’s possible the walls will need to be torn out to verify structural and electrical safety. As the homeowner, you’ll be responsible for repairing the damage of this verification before the house can be sold. If you acquire the proper permits beforehand, all that beautiful ceramic tiling you installed in the bathroom will remain untouched.

4. Permits Ensure City Records Include The Right Square Footage Of Your Home

If you don’t get a permit before making an addition to your home, the added square footage will not be recorded in government records. This means if you must sell your home, it will not be worth as much as it should be. It also might mean that a bank might deny financing to a buyer interested in purchasing your home.

You might think your small home remodel isn’t worthy of a permit, but the reality is, almost any renovation you make requires a permit. Be sure to inquire if your project needs a permit before you begin to avoid unsavory consequences.

Ways To Turn Your Home Into A Rental Property

Get the right insurance

The homeowner’s insurance policy you had when you owned and lived in the home yourself will not cover the property adequately once it’s a rental property. As soon as a tenant moves into your rental property, you assume certain risks and liabilities not covered by a typical homeowner’s insurance policy. Should something happen on the property that injures a tenant or makes the property unfit as a rental property, having the right insurance policy in place can mean the difference between profit and ruin.

Get the right permits

When your home becomes a rental property, it must meet certain guidelines in order to be legal. You must acquire the right permits that prove the property meets these regulations. An inspector will determine the safety and functionality of such things as electrical, heating, adequate exits, and other safety-related features in order to grant the permits. These permits are usually not expensive, but they are required.

Make repairs and upgrades

As with selling your house, the better it looks and functions, the more likely someone will want to rent it. Be careful here, though. You have to be able to recoup the cost of making the repairs and upgrades through your tenant’s’ monthly rent payments, so don’t get carried away. Be sure you can build the cost of the upgrades into the rent you charge your tenants.

Set a competitive rental rate

Your goal as a rental property owner is to increase your income. To do so, you have to charge a monthly rental rate that covers the cost of your mortgage, property taxes and any other costs associated with the home. At the same time, your rental rate has to be close to, and competitive with other rental rates in the neighborhood. Find out what rental rates are for homes like yours in the same area to get a good idea of what you should charge.

Decide if being a landlord is right for you

Being a landlord is hard work. It requires a great deal of time catering to the tenant’s needs. If you don’t live close to your rental property, or you just don’t want the hassle of landlord duties, you can hire a property management company to take over the landlord duties. You can expect to pay about 10 percent of your rental rate for such a service.

Find a good tenant

Take some time to educate yourself on fair housing laws. These laws protect you and your tenants from race and/or sex discrimination. Furthermore, make sure to conduct a credit check on anyone you are seriously considering renting to.

Any experienced landlord will tell you that finding a perfect tenant is nearly impossible. Since it’s illegal to turn down renters based on your own gut feeling, having a proper rental application for them to fill out helps eliminate potential problems. You can go to an attorney for help in drawing one up yourself, or a property management company can help as well.

Turning your home into a rental property takes time. You have to make sure you’ve covered all your bases to ensure the process goes smoothly. Use the considerations above to help you turn your own home into a rental property.

5 Mistakes To Watch Out For When Flipping A Home

Flipping houses, otherwise known as wholesale real estate investing, is an investment strategy in which an investor purchases a piece of property for cheap and then turns around and sells it for a profit. Whether that profit is made from price appreciation or capital improvements doesn’t matter. The key is to buy low and sell high.

The above information is a simple overview of house flipping, but what follows is a more in-depth look into the pitfalls of this type of investing.

1. Not Having Enough Money

Real estate investing is expensive, no matter what type of investment opportunity you get in on. When flipping a home, every day you own it costs you money (mortgage, interest, taxes, utilities, etc.). Many investors purchase properties that need repairs in order to keep acquisition costs low. This means repair costs have to be factored into the amount needed to successfully flip a property. It’s vital that you research all the costs associated with buying, owning, and repairing a home in order to sell it for a profit later.

2. There’s Never Enough Time

Flipping a home is time-consuming, especially if it needs repairs first. You’ll spend weeks, and sometimes months, looking for the right property to buy and spend time making repairs. Even if you don’t do the repairs yourself, you’ll still need to supervise the operation. Once everything is done, you’ll need to put the home up for sale and show it to prospective buyers. That’s a lot of back and forth if you do it yourself.

3. You Don’t Possess Enough Skill

If you aren’t handy with tools or don’t know how to lay carpet or fix a sink, flipping houses may not be for you. Most of the profit made from flipping a house comes from being able to do a majority of the work yourself. If you have to hire someone to make repairs, you’re cutting into your profits. Many house flippers are actually construction, plumbing, and electrical professionals with the skills to do most of the work themselves.

4. You Don’t Know Enough About Real Estate Investing

The real estate market is volatile, making it difficult for the average Joe to know a good deal from a bad one. To be a successful flipper, you need to be able to spot a good deal – the right property, located in the right place, selling for the right price. Aside from the market, you also need to understand real estate laws, tax laws, and be able to choose which repairs are necessary and which are not.

5. You Aren’t Patient

A good house flipper is patient. He takes his time and waits for the right opportunity to come along. A novice might run out and snatch up the first home he sees, hiring expensive contractors to make repairs. An expert flipper makes as many of the repairs as possible himself. Lastly, a newbie flipper might hire an agent to help him sell the house, while a professional flipper takes advantage of the lower cost for-sale-by-owner option.

If you’re thinking that flipping houses is right for you, be sure you consider the five pitfalls above to be sure you know what you’re getting into.

5 Costs New Real Estate Investors Need To Consider

As a new real estate investor, you’re probably very excited by the prospect of building an almost endless wealth. Deciding to be a real estate investor is a substantial choice resulting in countless investment opportunities. It takes a special person to follow this path, and we’re happy to walk it with you. To help you prepare for the journey ahead, we’ve compiled a list of several costs associated with real estate investing that all new investors should consider.

1. Closing Costs

Closing costs can be considerable, and they add up quickly. Separate from the purchase price of the property, closing costs are a part of every real estate transaction. Included in closing costs are fees such as loan origination fees, homeowner’s insurance, transfer fees, government recording fees, and broker commissions. Every real estate investor needs to consider these costs when negotiating the purchase of a property, because they can be a deciding factor in whether to go ahead with the deal or look for something less expensive.

2. Taxes

As with any other form of income, the income from your real estate investments is taxable. You will probably pay your taxes once a year, so it’s important to set money aside for the expense. Investors selling an investment property may be eligible to use a 1031 Exchange tax break to defer tax liability to a future date.

3. Unanticipated Repairs

While many issues with a property can be detected with a home inspection, there are those that go unnoticed until after the sale has gone through. For instance, mold or water damage inside the walls can easily be missed, as can any underground septic or sewer problems, too. If unexpected repairs pop up after you buy a property, it’s your obligation and financial responsibility to address them, so having extra funds set aside is always a good idea.

4. Hiring Property Management

As a new real estate investor, you probably have plenty of time to manage a single property and work a full-time job. As your investing business grows, however, it can become very difficult to manage it all yourself. Hiring a property management company to assist you with the daily tasks of managing your rentals is an option. You can expect to pay a company like this up to 10 percent of the monthly rent the property takes in as well as additional fees if they have to find new tenants for vacancies that occur.

5. Vacancies

If you use your investment property as a rental unit, there will be times it stands empty. This vacancy can lead to substantial financial loss in two ways: no profit coming in from monthly rent payments, and out-of-pocket mortgage, insurance, and property tax payments with no rent coming in to cover them. If you anticipate ahead of time the probability of vacancies due to time needed for repairs or lack of tenancy, you can put aside a nest egg that covers the costs until new tenants move in. There’s no doubt that being a real estate investor is a lucrative business. However, as a new investor, you must be aware of the considerable costs of starting out. Planning ahead and understanding the costs associated with investing in real estate can help you build a successful business.

4 Things To Ask Yourself Before Investing In Condos

If that extra cash is burning a hole in your pocket and you think you’d like to try your hand at condo investing, take a minute to consider a few things.

While it’s tempting to take advantage of the currently low-interest rates and high appreciation rates, as well as the consistent income of condo investing, there are a few questions that need answering before you dive in.

1. What Stipulations Does The Lender Require?


If you plan to finance your condo investment, there are likely going to be strict requirements you’ll need to abide by. For instance, many lenders require 20-25 percent down (this usually applies to most real estate investments – condo or otherwise).

Furthermore, the lender may also require you to live in the building for up to a year before being able to rent it out. If they don’t require you to live in the unit, you may be required to put more money down upfront. If the condo you intend to purchase is under litigation, the lender may not be willing to finance it at all.

2. How Long Do You Intend To Keep Ownership Of The Condo?


Condos tend to appreciate slower than individual real estate properties. Of course, the area and the market have something to do with appreciation as well. On average, however, you should plan to keep a condo for at least five years to see the highest return on your investment. The longer you own a condo, the better off you’ll be.

3. What Do HOA Fees Cover And Who Pays Them?


Many condo owners are shocked when they find out how much homeowner’s association (HOA) fees are. Once you understand what an HOA actually covers, you might be more understanding of the expense.

HOAs are typically in charge of things like sewer, water, garbage, exterior maintenance, lawn care, security, a rec center, pool, and more.

As a condo owner, you may decide to pass the HOA fees on to your tenants. The best way to do this is to increase the monthly rent rather than having the tenants pay directly to the HOA itself.

4. Will You Manage The Condo Yourself Or Hire A Property Manager?


Dealing with tenants is difficult at best. They expect you to be available round the clock and to address their needs immediately. This is especially true in markets where rents are on the rise.

If you choose to manage the building yourself, you’ll need to set firm rules in the lease agreement as to your operating hours and where/who to contact after hours or when you’re out of town. It’s important to have everything in writing and be consistent in your dealings. If there’s a dispute of some sort with a tenant, official forms will be the best way to document the process.

If you don’t want to be the go-to guy for your tenants, you can hire a property management company to do it for you. Do your research and find a reputable one that won’t cut into your profits too much.

Investing in condos is a great way to increase your wealth, but it’s important you consider the questions above before jumping in with both feet.

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