To nab a good home improvement professional, look for these signs of excellence (or trouble).
Ask the right questions
Call at least three references (start in the middle of the list) whose projects were similar to yours. In addition to standard queries about the quality of the work and any cost overruns, gain more insight by asking the following:
How has the work held up over time?
Make sure to talk to one homeowner who had the work done at least a few years ago - enough time for flaws to reveal themselves.
Was the contractor easy to reach?
You want a contractor who picks up his cell phone right away when you call him - or at least returns messages within a few hours.
How were problems resolved?
Every job will hit snags; the real test of a contractors merit is how well he handles them. He should have been able to minimize delays, added expense and anxiety - and get the job done right in the end.
Money Magazine) -- One upside to the popped real estate bubble is that hiring contractors has suddenly become a lot easier. A couple of years ago, it seemed like you had to be an A-list celebrity or a hedge fund tycoon to get one to so much as call you back. But with homeowners increasingly hesitant to plow big bucks into home improvement, even the best contractors might pick up your call before the second ring.
Still, just because he's responsive now doesn't mean he will be when you're in the middle of a project - or that he'll do quality work that's on time and on budget. So here are nine telltale signs, both good and bad, that you can watch for when you're interviewing any home improvement contractors, from roofers to foundation repairers.
Green light
While these indicators don't guarantee that you've found the next Norm Abram, they should give you confidence.
He has a good rep in the industry. You already ask friends and neighbors to recommend good contractors, but a more reliable source of referrals is other people in the trades: a plumber you love who raves about a general contractor, for example, or a great tile shop that suggests a tile setter.
They've done business with him, they know how well he plies his craft, and if they're willing to put their professional reputations on the line by vouching for him, they must like what they see.
His business card includes a local address. A tradesman who provides a physical address that's in your community is far less likely to disappear on you than someone whose true locale is hidden behind a post office box.
His list of references is a mile long. Even terrible contractors have had a few happy clients along the way - or have family members who can play the part when you call. The longer the list of references, the less likely it's rigged.
"Call a handful of them, skipping around the list," says Angie Hicks, the founder of angieslist.com, where (for a monthly fee of $4.50 to $8.75, depending on where you live) customers can praise or pan people they've worked with - and read one another's reviews.
Yellow light
There are some good-but-quirky tradesmen who exhibit the following traits. Think twice about hiring them unless every other indicator looks terrific.
He drives a rusted-out jalopy. A bucket of bolts that leaves an oil slick in your driveway doesn't bode well for the attention to detail or fiscal stability of the person driving it.
"That's not to say everyone has to ride around in a gleaming new truck," says Dick Mitchell, president of the New Orleans branch of the Better Business Bureau, the national nonprofit that lends its logo to participating companies meeting its standards (you can find a searchable list of member contractors at bbb.org). "But it should be clean and well maintained." Painted-on signs are better than magnetic ones, which are cheap and temporary.
He wants cash. Even if you don't care that he's shirking his taxes by taking cash (or a check made out to cash), consider what other costs he may be cutting - like licensing fees, insurance bills and skilled crew members.
To investigate a potential contractor's finances, look him up at contractorcheck.com, where (for $13) you can find information about his licensing, insurance and financial stability, as well as any legal actions against him.
He doesn't provide a cell number. Sure, you might find the rare contractor who has someone (probably his wife) manning his business line. But for the most part, the only way to quickly get hold of a tradesman is by cell phone. If he doesn't want to give out that number, it isn't because he's conserving his minutes - he doesn't want to be reachable.
Red light
If you see any of these signs, don't hire the guy - even if you've had good luck working with him before.
He wants to skip the permit - or have you apply for it. Any major improvement project legally requires a building permit, which means that inspectors will check the work. If a contractor wants to go without a permit, it means he'd rather not have anyone looking over his shoulder (other than you, but let's face it, you don't know what to look for).
If he wants you to apply for the permit yourself, it could be because he doesn't have the necessary state licensing - and it means you'd be the middleman between the inspector and contractor instead of letting them work things out directly.
He solicits business door to door. A paving contractor rings your bell to say he just did a job in the neighborhood, has extra materials and will cut you a rock-bottom deal if he can work on yours that afternoon. Sounds great, right?
Trouble is, you have no idea who he is or if he's going to do the job right. And if that new pavement starts cracking three weeks later, you'll never get him back to repair the damage.
He seems sleazy. Ultimately, you have to feel comfortable letting this person into your home. Clearly, you're not going to hand your house keys to someone who flips a cigarette butt into your azaleas or leers at your 16-year-old daughter.
But if he doesn't look you straight in the eye or you just have a gut feeling that something might be amiss, go ahead and cross him off your list. Nowadays, thankfully, there are plenty of contractors available to do the job.
How to Select a Realtor or Real Estate Broker
If you are considering purchasing property in which to house your small business, where should you begin? Although you are free to search for real estate properties on your own, your best option is to find a professional realtor or real estate broker to handle the transaction for you.
There are definite advantages to working with a real estate professional, such as:
* Peace of mind. Real estate transactions can be tricky, and if you do not know what you are doing, you could end up spending more money than you had originally budgeted. Having a real estate professional at your side can help you meet important deadlines and avoid costly mistakes.
* Savings in time and money. Let a professional realtor use his or her experience to save you money by negotiating in your best interest. And you can devote your valuable time to your own business.
* Reduced frustration. Let’s face it, real estate transactions are rarely a walk in the park. Handing over the paperwork to a professionally trained real estate agent can help you avoid a lot of headaches.
But how best to select the right person or firm to represent you and your business goals? No doubt the local telephone book is filled with real estate professionals just waiting to be contacted. But if you haven’t used a real estate agent before and do not know where to start, it is helpful to have some general guidelines.
Make sure to choose a realtor or real estate professional who:
* Works full-time. While there are many part-time real estate professionals out there, it is advisable to choose a full-time realtor or agent. If you choose a person who handles real estate transactions only on weekends or a few days a week, you run the risk of missing out on many opportunities.
* Has experience. Make sure to pick an experienced real estate professional. Inquire how many real estate transactions he or she typically handles each year. The more seasoned the professional, the smoother your real estate transaction will be, so put yourself in the hands of someone who has been around the block.
* Is likeable and trustworthy. As with any other business relationship, your realtor should be someone you feel comfortable with. He or she should be confident, easy to talk to, and trustworthy. This person will play a large role in the future of your business, so make sure to engage someone who has a clear understanding of your business goals.
* Agrees to an “out clause.” One of the worst things that can happen to a small business owner is to get stuck in a six month contract with a real estate agent they can’t stand. Perhaps you were impressed during the initial interview, or maybe he or she had first-class references. But even the closest relationship can sour over time, so writing an “out clause” into the contract is a smart move.
* Is Internet savvy. As with most other businesses, the world of real estate has moved onto the Web. These days, it’s all about how fast you can find a property, so make sure to go with a real estate professional who is comfortable using the Internet.
allbusiness.com
There are definite advantages to working with a real estate professional, such as:
* Peace of mind. Real estate transactions can be tricky, and if you do not know what you are doing, you could end up spending more money than you had originally budgeted. Having a real estate professional at your side can help you meet important deadlines and avoid costly mistakes.
* Savings in time and money. Let a professional realtor use his or her experience to save you money by negotiating in your best interest. And you can devote your valuable time to your own business.
* Reduced frustration. Let’s face it, real estate transactions are rarely a walk in the park. Handing over the paperwork to a professionally trained real estate agent can help you avoid a lot of headaches.
But how best to select the right person or firm to represent you and your business goals? No doubt the local telephone book is filled with real estate professionals just waiting to be contacted. But if you haven’t used a real estate agent before and do not know where to start, it is helpful to have some general guidelines.
Make sure to choose a realtor or real estate professional who:
* Works full-time. While there are many part-time real estate professionals out there, it is advisable to choose a full-time realtor or agent. If you choose a person who handles real estate transactions only on weekends or a few days a week, you run the risk of missing out on many opportunities.
* Has experience. Make sure to pick an experienced real estate professional. Inquire how many real estate transactions he or she typically handles each year. The more seasoned the professional, the smoother your real estate transaction will be, so put yourself in the hands of someone who has been around the block.
* Is likeable and trustworthy. As with any other business relationship, your realtor should be someone you feel comfortable with. He or she should be confident, easy to talk to, and trustworthy. This person will play a large role in the future of your business, so make sure to engage someone who has a clear understanding of your business goals.
* Agrees to an “out clause.” One of the worst things that can happen to a small business owner is to get stuck in a six month contract with a real estate agent they can’t stand. Perhaps you were impressed during the initial interview, or maybe he or she had first-class references. But even the closest relationship can sour over time, so writing an “out clause” into the contract is a smart move.
* Is Internet savvy. As with most other businesses, the world of real estate has moved onto the Web. These days, it’s all about how fast you can find a property, so make sure to go with a real estate professional who is comfortable using the Internet.
allbusiness.com
Avoiding Home Decorating Disasters
By Tom Kraeutler, AOL Home Improvement Editor
So you’ve shopped 'til you've dropped, poured over every issue of House Beautiful you can find and are finally ready to tackle a home decorating project to update an otherwise out of date space.
We’ll before you push "go," it is a good idea to know the most common interior design don'ts. Avoiding these will improve your design, save time and money, and help make your experience more enjoyable.
Davis Remignanti, lead design consultant for online retailer Furniture.com, says many decorating pitfalls are easy to avoid, including:
The Big Bang. Don’t expect to go from blank canvas to finished interior in one fell swoop. Interesting interiors are created in layers, over time. Don’t try to get it all at once.
Wing and a Prayer. Don’t start without a plan. Survey your resources - your current furnishings, your work schedule, your budget. Then make a list of needs, wants, and things you'd love "down the road." Reconcile accordingly.
Ebenezer Scrooge. There are times when it’s better to splurge than to economize. Shop carefully for the right balance of price and quality. A “bargain” sofa loses its charm when its seams split and arms start to wobble.
My Way or the Highway. Be open-minded about new ideas - sometimes a fresh approach is best. Try re-arranging your furniture to jump start a design update. Furniture.com also offers a free online Room Planner to help lay out your room.
Making Do. That “perfectly good” hand-me-down dining room probably isn’t winning any points for good design. Just because someone offers you something, you don’t have to accept. Second-hand can be wonderful and inspiring, as long it fits with your “look.”
More is Better. Mix, as well as match, your furnishings to add variety and increase your design options. Use accent pieces to introduce new colors, textures and shapes to prevent your room from becoming monotonous.
Doubting Thomas. Don’t trust your own judgment? Do research, clip photos from magazines, watch design shows, and ask your friends. Start small, build your confidence and learn from mistakes. The best designers did the same.
Leslie Segrete, decorator, designer and carpenter on TLC’s 'While You Were Out' and 'Trading Spaces,' has also seen her share of decorating don’ts. “Good design is process of designing space that meets the needs of the family who lives in that room. But too much stuff is the killer of design dreams so every decorating should project begin with a good clean-up and all out effort to eliminate as much clutter as possible, she said.” Segrete also suggests:
Borrowed is better. The best way to keep costs down when freshening up a room or completely redecorating is to borrow decorative items from others rooms in the house. Snoop around that finishing touch might just be hiding in the attic.
Check the bones. If your search of secondhand furniture stores turned up some bargains, the most important thing to check before purchase is the frame. If it has a nice shape and "good bones," new fabric or fresh finish can take that trash to treasure.
If you are overwhelmed by the design process, Segrete says dividing rooms into areas of usefulness, like a place for relaxing and an area for entertaining is an easy way to get started.
Note: Tom Kraeutler is the Home Improvement Editor for AOL and host of The Money Pit, a nationally syndicated home improvement radio program. To find a local radio station, download the show’s podcast or sign-up for Tom’s free weekly e-newsletter, visit the program’s website. (sigombak)
So you’ve shopped 'til you've dropped, poured over every issue of House Beautiful you can find and are finally ready to tackle a home decorating project to update an otherwise out of date space.
We’ll before you push "go," it is a good idea to know the most common interior design don'ts. Avoiding these will improve your design, save time and money, and help make your experience more enjoyable.
Davis Remignanti, lead design consultant for online retailer Furniture.com, says many decorating pitfalls are easy to avoid, including:
The Big Bang. Don’t expect to go from blank canvas to finished interior in one fell swoop. Interesting interiors are created in layers, over time. Don’t try to get it all at once.
Wing and a Prayer. Don’t start without a plan. Survey your resources - your current furnishings, your work schedule, your budget. Then make a list of needs, wants, and things you'd love "down the road." Reconcile accordingly.
Ebenezer Scrooge. There are times when it’s better to splurge than to economize. Shop carefully for the right balance of price and quality. A “bargain” sofa loses its charm when its seams split and arms start to wobble.
My Way or the Highway. Be open-minded about new ideas - sometimes a fresh approach is best. Try re-arranging your furniture to jump start a design update. Furniture.com also offers a free online Room Planner to help lay out your room.
Making Do. That “perfectly good” hand-me-down dining room probably isn’t winning any points for good design. Just because someone offers you something, you don’t have to accept. Second-hand can be wonderful and inspiring, as long it fits with your “look.”
More is Better. Mix, as well as match, your furnishings to add variety and increase your design options. Use accent pieces to introduce new colors, textures and shapes to prevent your room from becoming monotonous.
Doubting Thomas. Don’t trust your own judgment? Do research, clip photos from magazines, watch design shows, and ask your friends. Start small, build your confidence and learn from mistakes. The best designers did the same.
Leslie Segrete, decorator, designer and carpenter on TLC’s 'While You Were Out' and 'Trading Spaces,' has also seen her share of decorating don’ts. “Good design is process of designing space that meets the needs of the family who lives in that room. But too much stuff is the killer of design dreams so every decorating should project begin with a good clean-up and all out effort to eliminate as much clutter as possible, she said.” Segrete also suggests:
Borrowed is better. The best way to keep costs down when freshening up a room or completely redecorating is to borrow decorative items from others rooms in the house. Snoop around that finishing touch might just be hiding in the attic.
Check the bones. If your search of secondhand furniture stores turned up some bargains, the most important thing to check before purchase is the frame. If it has a nice shape and "good bones," new fabric or fresh finish can take that trash to treasure.
If you are overwhelmed by the design process, Segrete says dividing rooms into areas of usefulness, like a place for relaxing and an area for entertaining is an easy way to get started.
Note: Tom Kraeutler is the Home Improvement Editor for AOL and host of The Money Pit, a nationally syndicated home improvement radio program. To find a local radio station, download the show’s podcast or sign-up for Tom’s free weekly e-newsletter, visit the program’s website. (sigombak)
For Some, Renting Makes More Sense
By Noelle Knox, USA TODAY
-Sigombak-
There's been a debate ever since Micki Seibel and Jan Leger told their friends they were going to sell their home in the heart of San Francisco and rent an apartment. "Half think it's great. The other half have been trying to talk us out of it," says Seibel, 34, who works for MyNewPlace, a new online apartment search firm.
Unstructured Blog: Pros and Cons, Renting vs. Owning
Though Seibel and Leger love their home, which they bought in 2002 for about $1 million, it's been draining them of $5,600 a month for their mortgage and taxes, when they could be renting a place just as nice in the same neighborhood for about $3,400. "We can put that savings in the bank and make it work for us and take away the risk of the unknown future of the real estate market," Seibel notes.
It's hard to imagine the American dream as a two-bedroom apartment with a pool, instead of a single-family home with a white picket fence. But in some of the nation's priciest real estate markets, that's what's happening. The financial reasons for renting instead of buying are the strongest they've been in 25 years.
"The last time home affordability fell to such an extreme was in 1981, but that was because interest rates jumped from 13 percent to 16 percent," says Hessam Nadji, a managing director for Marcus & Millichap, an investment brokerage firm.
"What's alarming this time is that interest rates are still historically low. That means rents need to go up, and home prices to come down in some areas, for the balance to be regained. And that may be a painful process that takes between a year to 18 months."
The market was thrown out of kilter during the five-year real estate boom. Renters stampeded at the sight of an "open house" sign, trying to buy anything they could afford. Prices soared by 40 percent, and by even more along the coasts and in such places as Las Vegas and Phoenix. Landlords couldn't raise rents as fast, so many apartment owners simply gave up and converted their buildings into condos for sale.
So how out of whack is it now?
The national median mortgage payment is $1,687 a month, nearly twice the median rent payment of $868 a month. The financial gap is even larger in cities where home prices recently rose to sky-scraping heights, such as New York, San Francisco, Los Angeles and Washington, according to an analysis by Marcus & Millichap for USA TODAY.
Though adjustable-rate and other exotic mortgages enabled families to buy homes with low-to-no down payments, many of them are still stretched to the financial limit. For a family earning the U.S. median income of $46,913, for example, owning the median-price home of $224,739 would eat up 51 percent of their income. Renting would require just 25 percent.
Buyers sit on the sidelines
Add rising interest rates, and it's easy to see why many would-be home buyers are sitting on the sidelines and why even some homeowners are cashing out.
By renting, they gain the flexibility of a lease and freedom from home repairs. They can also invest more money in stocks, bonds and other assets that could appreciate faster than real estate over the next couple of years.
"For someone debating whether to rent or buy in a market that's experienced recent and substantial house-price run-up, it may be better to delay the home purchase and see what the market looks like a year or two down the road," says Stuart Gabriel, director of the Lusk Center for Real Estate at the University of Southern California.
He adds, though, "Over an extended period of time, homeownership is going to make sense for most people, most of the time."
How long is an extended period? It depends on the size of the gap between the cost of renting vs. owning.
A homeowner in Orange County, Calif., for example, would have to stay in his or her home for a decade before breaking even on out-of-pocket costs compared with renting, according to Marcus & Millichap.
Of course, on the other side of the debate, homeowners can argue that they're building wealth by investing in an asset that appreciates over time, while renters are throwing money out the window. Homeowners can also enjoy stability (with a fixed-rate mortgage), tax advantages and financial security.
'It's crazy'
"Real estate is probably the best investment any young person can make," says Yadiris Ferreira, 29, who bought a condo last month in Pembroke Pines, Fla.
Still, her mortgage, including homeowner association fees, totals $1,800 a month -- more than half the money she takes home as a high school math teacher. "It's crazy," Ferreira concedes.
But, she explains, "If I didn't buy something soon, it was going to get to the point that I couldn't afford anything."
Lots of other people thought the same way during the boom years. But now home sales are falling, and in some cities, prices have started dropping, too. In June, condo prices fell 2 percent nationwide, and single-family home prices dipped in several markets, including San Diego, Boston and Washington.
"It would be scary to buy something in a hot market and have the price just fall a few months after we buy," says Joel Coffey, a 21-year-old accountant who signed a lease last week with his wife, Katy, for an apartment in Seattle.
As more people like the Coffeys take a wait-and-see attitude, they put pressure on home sellers to cut prices. At the same time, as renters swarm the apartment market, they force up rents. This year, rents are expected to climb about five percent, and by even more in such expensive markets as Seattle, New York and San Francisco.
When the Coffeys were apartment hunting, Katy, 22, called a landlord who had posted an ad on the Craigslist website. "She told me, 'You're the sixth person to contact me, and I've had it listed for 15 minutes.' "
In Manhattan, the rental market looks pretty much the way the housing market did two years ago: multiple applications, dueling agents and rising prices.
"Renting instead of buying is becoming a more popular option than it's been in a long time," says Jonathan Miller, CEO of Miller Samuel, a Manhattan appraisal company. "Landlords who have been suffering for the last four or five years are trying to make up for lost time."
Rents in New York City have already climbed 5 percent to 20 percent over the past year, but that's still not enough to rebalance the market. Miller estimates that rents would have to rise an additional 20 percent before it would make more financial sense for renters to start buying.
In San Francisco, where the median home costs about $760,000, apartment rents have jumped 15 percent in the past two months, says Janan New, executive director of the San Francisco Apartment Association.
"There is a huge demand for apartments in San Francisco because homes are so unaffordable," she says.
That's still not enough to persuade Seibel and Leger to keep their home there. "We've been watching the rents," Seibel says. "But for what we're paying for our mortgage and property taxes, we could be renting a mansion in Pacific Heights."
-Sigombak-
There's been a debate ever since Micki Seibel and Jan Leger told their friends they were going to sell their home in the heart of San Francisco and rent an apartment. "Half think it's great. The other half have been trying to talk us out of it," says Seibel, 34, who works for MyNewPlace, a new online apartment search firm.
Unstructured Blog: Pros and Cons, Renting vs. Owning
Though Seibel and Leger love their home, which they bought in 2002 for about $1 million, it's been draining them of $5,600 a month for their mortgage and taxes, when they could be renting a place just as nice in the same neighborhood for about $3,400. "We can put that savings in the bank and make it work for us and take away the risk of the unknown future of the real estate market," Seibel notes.
It's hard to imagine the American dream as a two-bedroom apartment with a pool, instead of a single-family home with a white picket fence. But in some of the nation's priciest real estate markets, that's what's happening. The financial reasons for renting instead of buying are the strongest they've been in 25 years.
"The last time home affordability fell to such an extreme was in 1981, but that was because interest rates jumped from 13 percent to 16 percent," says Hessam Nadji, a managing director for Marcus & Millichap, an investment brokerage firm.
"What's alarming this time is that interest rates are still historically low. That means rents need to go up, and home prices to come down in some areas, for the balance to be regained. And that may be a painful process that takes between a year to 18 months."
The market was thrown out of kilter during the five-year real estate boom. Renters stampeded at the sight of an "open house" sign, trying to buy anything they could afford. Prices soared by 40 percent, and by even more along the coasts and in such places as Las Vegas and Phoenix. Landlords couldn't raise rents as fast, so many apartment owners simply gave up and converted their buildings into condos for sale.
So how out of whack is it now?
The national median mortgage payment is $1,687 a month, nearly twice the median rent payment of $868 a month. The financial gap is even larger in cities where home prices recently rose to sky-scraping heights, such as New York, San Francisco, Los Angeles and Washington, according to an analysis by Marcus & Millichap for USA TODAY.
Though adjustable-rate and other exotic mortgages enabled families to buy homes with low-to-no down payments, many of them are still stretched to the financial limit. For a family earning the U.S. median income of $46,913, for example, owning the median-price home of $224,739 would eat up 51 percent of their income. Renting would require just 25 percent.
Buyers sit on the sidelines
Add rising interest rates, and it's easy to see why many would-be home buyers are sitting on the sidelines and why even some homeowners are cashing out.
By renting, they gain the flexibility of a lease and freedom from home repairs. They can also invest more money in stocks, bonds and other assets that could appreciate faster than real estate over the next couple of years.
"For someone debating whether to rent or buy in a market that's experienced recent and substantial house-price run-up, it may be better to delay the home purchase and see what the market looks like a year or two down the road," says Stuart Gabriel, director of the Lusk Center for Real Estate at the University of Southern California.
He adds, though, "Over an extended period of time, homeownership is going to make sense for most people, most of the time."
How long is an extended period? It depends on the size of the gap between the cost of renting vs. owning.
A homeowner in Orange County, Calif., for example, would have to stay in his or her home for a decade before breaking even on out-of-pocket costs compared with renting, according to Marcus & Millichap.
Of course, on the other side of the debate, homeowners can argue that they're building wealth by investing in an asset that appreciates over time, while renters are throwing money out the window. Homeowners can also enjoy stability (with a fixed-rate mortgage), tax advantages and financial security.
'It's crazy'
"Real estate is probably the best investment any young person can make," says Yadiris Ferreira, 29, who bought a condo last month in Pembroke Pines, Fla.
Still, her mortgage, including homeowner association fees, totals $1,800 a month -- more than half the money she takes home as a high school math teacher. "It's crazy," Ferreira concedes.
But, she explains, "If I didn't buy something soon, it was going to get to the point that I couldn't afford anything."
Lots of other people thought the same way during the boom years. But now home sales are falling, and in some cities, prices have started dropping, too. In June, condo prices fell 2 percent nationwide, and single-family home prices dipped in several markets, including San Diego, Boston and Washington.
"It would be scary to buy something in a hot market and have the price just fall a few months after we buy," says Joel Coffey, a 21-year-old accountant who signed a lease last week with his wife, Katy, for an apartment in Seattle.
As more people like the Coffeys take a wait-and-see attitude, they put pressure on home sellers to cut prices. At the same time, as renters swarm the apartment market, they force up rents. This year, rents are expected to climb about five percent, and by even more in such expensive markets as Seattle, New York and San Francisco.
When the Coffeys were apartment hunting, Katy, 22, called a landlord who had posted an ad on the Craigslist website. "She told me, 'You're the sixth person to contact me, and I've had it listed for 15 minutes.' "
In Manhattan, the rental market looks pretty much the way the housing market did two years ago: multiple applications, dueling agents and rising prices.
"Renting instead of buying is becoming a more popular option than it's been in a long time," says Jonathan Miller, CEO of Miller Samuel, a Manhattan appraisal company. "Landlords who have been suffering for the last four or five years are trying to make up for lost time."
Rents in New York City have already climbed 5 percent to 20 percent over the past year, but that's still not enough to rebalance the market. Miller estimates that rents would have to rise an additional 20 percent before it would make more financial sense for renters to start buying.
In San Francisco, where the median home costs about $760,000, apartment rents have jumped 15 percent in the past two months, says Janan New, executive director of the San Francisco Apartment Association.
"There is a huge demand for apartments in San Francisco because homes are so unaffordable," she says.
That's still not enough to persuade Seibel and Leger to keep their home there. "We've been watching the rents," Seibel says. "But for what we're paying for our mortgage and property taxes, we could be renting a mansion in Pacific Heights."
Getting Into Real Estate Investing
Chris Pummer, AOL Real Estate Columnist
-Sigombak-
The recent collapse of U.S. home sales ripped a magnificent bloom off the rose of real-estate investing -- yet buying rental properties remains one of the best ways for middle-income Americans to build wealth.
While the rich have a phalanx of investment advisors to help enrich them further every day, middle-class Americans struggle to just set aside enough money in their 401(k)s to secure their retirement. Real estate offers people of modest means an opportunity to build wealth in an investment they understand as homeowners and renters themselves.
Studies show residential real-estate investing returns an average 10 percent a year ? equal to the historic return for stocks. While it requires active management of the asset on the investor?s part vs. more passive stock investing, it can be a rewarding part-time endeavor for those with a long-term horizon.
Leveraged investing
The beauty of real-estate investing is the ability to leverage other people?s money ? namely, a mortgage lender and renters ? to make money for yourself.
Take, for example, a $200,000 home bought with 10 percent down and $8,000 in closing costs. If that property appreciates just 4 percent a year over 20 years, its owner turned a $28,000 investment into a $238,000 gain.
That scenario assumes the rental income covers annual mortgage, insurance, property-tax and maintenance costs, which it may not fully in the early years. But it also doesn?t factor in the likely surplus annual income in future years when rising rents more than cover fixed-mortgage costs.
Tangible asset
Unlike stocks, whose value is a matter of perception and psychology, real estate is a tangible asset and not just a paper stock certificate (which shareholders don?t even get in hand anymore!).
The steadily rising cost of constructing new homes protects and ultimately enhances the value of existing properties. That underlying strength is even greater in metro areas with a limited supply of developable land within easy commuting distance to the center city, or well-located properties in desirable coastal and resort communities.
Direct control
Unlike the crapshoot inherent in the stock market, real-estate investors have direct control over their investments. They set the rents, choose tenants and decide what improvements to make and when.
Rather than staking their fortunes with corporate executives who can fail to grow their companies for any number of competitive reasons, real-estate investors manage their own assets based on local market conditions.
Limited risk
Real estate values can and do fall as homeowners discovered in Texas in the 1980s, southern California in the early 1990s and various regional markets throughout the U.S. more recently.
Still, long-term investors seeking to build wealth for their retirement years face little downside risk with real estate. America?s rising population, shrinking household sizes and unfortunately high divorce rate are expected to fuel increasing demand for places to live for decades to come.
Diversification
Real-estate values generally don?t rise and fall in tandem with stocks and sometimes are countercyclical, moving in the opposite direction. It is what?s called in the investment world a ?non-correlated? asset.
Diversifying investment holdings into rental properties provides a solid counterbalance to stock-laden 401(k) and IRA accounts. A modestly priced, three-bedroom rental home won?t ever produce the explosive returns of a sensational stock like Google, but its owner can sleep easier knowing his or her future wealth isn?t wholly dependent on the whims of the stock market.
Immediate returns
Self-anointed real estate gurus trumpet the fortunes to be made in buying and flipping distressed and foreclosed properties, a fast-buck strategy that?s especially difficult to pull off in weak housing markets where properties languish for sale for months on end.
Still, smart shoppers can reap immediate paper gains on many properties. At any given time ? and especially in today?s markets with mounting supplies of unsold homes ? individual home sellers forced to sell quickly due to job relocation, divorce or unemployment may accept below-market prices to facilitate a sale.
Improvement potential
Just as with the purchase of a first home, it?s wise when shopping for rental properties to buy the least expensive home in the nicest possible neighborhood.
The benefit for the owner is threefold: The better the neighborhood, the less likely the number of rental properties available within it. Improvements made to modest homes in nicer areas will yield higher rents. And an owner could simply maintain the property during the rental period and improve it just prior to sale to bring it up to the neighborhood standard and command a much higher asking price.
The benefit of inflation
As Americans have seen in the last year, rising mortgage rates hurt home sales and property values. Yet rising rates can have a positive impact on owners of investment properties.
The fewer the number of people buying homes, the greater the number of renters, which heightens demand for rental properties. Since real-estate investment tends to slow as mortgage rates rise, that also means a tighter supply of rental homes in the near term.
Interest rate hikes are the Federal Reserve Bank?s means to curtail inflation by making borrowing money more expensive. Inflation benefits real-estate investors who can raise rents accordingly. So while long-term appreciation suffers from mortgage-rate spikes, the immediate rental income picture improves.
Tax-deferred gains
Real-estate investing provides the same type of tax-deferred advantage of 401(k)s and IRAs. Owners aren?t taxed on the appreciation in a home?s value until the time of sale ? and even then, they can forestall paying taxes by rolling their gain into another property.
Add to that another major tax advantage: The ability under present tax law for owners of rental properties to move into the home for a total of two years in any five-year period and pay no tax on up to $500,000 in capital gains. That opportunity argues for buying rental properties you could comfortably inhabit yourself for a spell.
Of course, real-estate investing is not without its downsides, which should all be heavily weighed:
Illiquid investment
Unlike stocks, which can be sold with the push of a computer keystroke, selling a home can takes months and entails considerable costs. If you?re not prepared to tie up your money for years to come, best that you don?t.
The difficulty in quickly selling a property, however, can work in investors? favor by discouraging them from running scared in a market downturn and dumping properties. The relative liquidity of stock investing is actually one of its greatest drawbacks, since countless investors sell in a panic, often at a loss, when an individual stock or the overall market drops.
Cash-flow constraints
The ideal situation is to buy properties whose rental income covers the monthly ?carrying costs? ? i.e. mortgage and insurance payments, property taxes and maintenance costs. The run-up in U.S. home values in recent years has made that scenario difficult to attain in many regional markets.
New investors today may find themselves in a negative cash-flow situation, meaning the rent doesn?t cover their costs. Investors must be prepared financially to cover any such shortfall or risk losing the property if they can?t foot the bill ? a crushing problem now facing many recent investors saddled with properties they expected to flip for a fast profit.
Sporadic income and unforeseen costs
However good the cash-flow numbers may look going in, rental-property owners risk being squeezed on several unforeseeable fronts.
The first is tenants who fail to pay their rent in timely manner ? or not at all ? leaving it to the owner to cover their mortgage payments out-of-pocket until they collect the back rent or evict a deadbeat. Next is tenant turnover, which can leave a property unrented for several months a year, during which time the owner must also cover the nut. Lastly, there are major repairs that must be done -- such as a new roof, furnace or septic system ? that can cost well into the thousands of dollars that must be ponied up on the spot.
Landlording
Finally, there?s the angst of trying to do right by tenants who don?t reciprocate in kind. Some may destroy the home you?re improving for them without any intention of raising the rent. And all catch on fast to when you?re playing them.
Tenant selection is a skill rental-property owners need to master fast since it has an immeasurable influence on success. If you?re suspicious by nature and have a short fuse, this is no business for you. If you can learn to recognize great tenants who?ll carry your mortgage for years and care for your property as if it were their own, you may be wise to never raise their rent and reap tremendous long-term benefit.
-Sigombak-
The recent collapse of U.S. home sales ripped a magnificent bloom off the rose of real-estate investing -- yet buying rental properties remains one of the best ways for middle-income Americans to build wealth.
While the rich have a phalanx of investment advisors to help enrich them further every day, middle-class Americans struggle to just set aside enough money in their 401(k)s to secure their retirement. Real estate offers people of modest means an opportunity to build wealth in an investment they understand as homeowners and renters themselves.
Studies show residential real-estate investing returns an average 10 percent a year ? equal to the historic return for stocks. While it requires active management of the asset on the investor?s part vs. more passive stock investing, it can be a rewarding part-time endeavor for those with a long-term horizon.
Leveraged investing
The beauty of real-estate investing is the ability to leverage other people?s money ? namely, a mortgage lender and renters ? to make money for yourself.
Take, for example, a $200,000 home bought with 10 percent down and $8,000 in closing costs. If that property appreciates just 4 percent a year over 20 years, its owner turned a $28,000 investment into a $238,000 gain.
That scenario assumes the rental income covers annual mortgage, insurance, property-tax and maintenance costs, which it may not fully in the early years. But it also doesn?t factor in the likely surplus annual income in future years when rising rents more than cover fixed-mortgage costs.
Tangible asset
Unlike stocks, whose value is a matter of perception and psychology, real estate is a tangible asset and not just a paper stock certificate (which shareholders don?t even get in hand anymore!).
The steadily rising cost of constructing new homes protects and ultimately enhances the value of existing properties. That underlying strength is even greater in metro areas with a limited supply of developable land within easy commuting distance to the center city, or well-located properties in desirable coastal and resort communities.
Direct control
Unlike the crapshoot inherent in the stock market, real-estate investors have direct control over their investments. They set the rents, choose tenants and decide what improvements to make and when.
Rather than staking their fortunes with corporate executives who can fail to grow their companies for any number of competitive reasons, real-estate investors manage their own assets based on local market conditions.
Limited risk
Real estate values can and do fall as homeowners discovered in Texas in the 1980s, southern California in the early 1990s and various regional markets throughout the U.S. more recently.
Still, long-term investors seeking to build wealth for their retirement years face little downside risk with real estate. America?s rising population, shrinking household sizes and unfortunately high divorce rate are expected to fuel increasing demand for places to live for decades to come.
Diversification
Real-estate values generally don?t rise and fall in tandem with stocks and sometimes are countercyclical, moving in the opposite direction. It is what?s called in the investment world a ?non-correlated? asset.
Diversifying investment holdings into rental properties provides a solid counterbalance to stock-laden 401(k) and IRA accounts. A modestly priced, three-bedroom rental home won?t ever produce the explosive returns of a sensational stock like Google, but its owner can sleep easier knowing his or her future wealth isn?t wholly dependent on the whims of the stock market.
Immediate returns
Self-anointed real estate gurus trumpet the fortunes to be made in buying and flipping distressed and foreclosed properties, a fast-buck strategy that?s especially difficult to pull off in weak housing markets where properties languish for sale for months on end.
Still, smart shoppers can reap immediate paper gains on many properties. At any given time ? and especially in today?s markets with mounting supplies of unsold homes ? individual home sellers forced to sell quickly due to job relocation, divorce or unemployment may accept below-market prices to facilitate a sale.
Improvement potential
Just as with the purchase of a first home, it?s wise when shopping for rental properties to buy the least expensive home in the nicest possible neighborhood.
The benefit for the owner is threefold: The better the neighborhood, the less likely the number of rental properties available within it. Improvements made to modest homes in nicer areas will yield higher rents. And an owner could simply maintain the property during the rental period and improve it just prior to sale to bring it up to the neighborhood standard and command a much higher asking price.
The benefit of inflation
As Americans have seen in the last year, rising mortgage rates hurt home sales and property values. Yet rising rates can have a positive impact on owners of investment properties.
The fewer the number of people buying homes, the greater the number of renters, which heightens demand for rental properties. Since real-estate investment tends to slow as mortgage rates rise, that also means a tighter supply of rental homes in the near term.
Interest rate hikes are the Federal Reserve Bank?s means to curtail inflation by making borrowing money more expensive. Inflation benefits real-estate investors who can raise rents accordingly. So while long-term appreciation suffers from mortgage-rate spikes, the immediate rental income picture improves.
Tax-deferred gains
Real-estate investing provides the same type of tax-deferred advantage of 401(k)s and IRAs. Owners aren?t taxed on the appreciation in a home?s value until the time of sale ? and even then, they can forestall paying taxes by rolling their gain into another property.
Add to that another major tax advantage: The ability under present tax law for owners of rental properties to move into the home for a total of two years in any five-year period and pay no tax on up to $500,000 in capital gains. That opportunity argues for buying rental properties you could comfortably inhabit yourself for a spell.
Of course, real-estate investing is not without its downsides, which should all be heavily weighed:
Illiquid investment
Unlike stocks, which can be sold with the push of a computer keystroke, selling a home can takes months and entails considerable costs. If you?re not prepared to tie up your money for years to come, best that you don?t.
The difficulty in quickly selling a property, however, can work in investors? favor by discouraging them from running scared in a market downturn and dumping properties. The relative liquidity of stock investing is actually one of its greatest drawbacks, since countless investors sell in a panic, often at a loss, when an individual stock or the overall market drops.
Cash-flow constraints
The ideal situation is to buy properties whose rental income covers the monthly ?carrying costs? ? i.e. mortgage and insurance payments, property taxes and maintenance costs. The run-up in U.S. home values in recent years has made that scenario difficult to attain in many regional markets.
New investors today may find themselves in a negative cash-flow situation, meaning the rent doesn?t cover their costs. Investors must be prepared financially to cover any such shortfall or risk losing the property if they can?t foot the bill ? a crushing problem now facing many recent investors saddled with properties they expected to flip for a fast profit.
Sporadic income and unforeseen costs
However good the cash-flow numbers may look going in, rental-property owners risk being squeezed on several unforeseeable fronts.
The first is tenants who fail to pay their rent in timely manner ? or not at all ? leaving it to the owner to cover their mortgage payments out-of-pocket until they collect the back rent or evict a deadbeat. Next is tenant turnover, which can leave a property unrented for several months a year, during which time the owner must also cover the nut. Lastly, there are major repairs that must be done -- such as a new roof, furnace or septic system ? that can cost well into the thousands of dollars that must be ponied up on the spot.
Landlording
Finally, there?s the angst of trying to do right by tenants who don?t reciprocate in kind. Some may destroy the home you?re improving for them without any intention of raising the rent. And all catch on fast to when you?re playing them.
Tenant selection is a skill rental-property owners need to master fast since it has an immeasurable influence on success. If you?re suspicious by nature and have a short fuse, this is no business for you. If you can learn to recognize great tenants who?ll carry your mortgage for years and care for your property as if it were their own, you may be wise to never raise their rent and reap tremendous long-term benefit.
How to Finance Foreclosure Properties
-Sigombak-
Foreclosure properties, REO (Real Estate Owned) property owned by banks and other lenders, and properties threatened with imminent foreclosure all represent great investment opportunities for property buyers. They are the most popular source of affordable deals for those seeking bargain homes, because foreclosures often sell at or below wholesale prices.
Anybody can buy this kind of property. Basically all you need is some money and a willingness to bid. But be aware that if you attend a property auction, you may wind up bidding against professional foreclosure investment specialists who are also looking for cheap houses. If you are unsure about how the foreclosure real estate game is played, learn as much as possible ahead of time in the Learn Section of Bargain Homes, so that you are not at a disadvantage when making your purchase offer.
Before stepping into the foreclosure property arena, it is important to educate yourself. You’ll want to know as much as possible about such things as the pitfalls of hidden costs. For example, when purchasing a house that has a lien against it, the buyer may be responsible to pay back that debt. Such strings-attached baggage can include huge amounts of money owed to the IRS.
And you will want to explore various ways to come up with the money necessary to finance your purchase of a foreclosure. Some lenders don’t lend money for foreclosure property mortgages, while other lenders are eager to make loans to help you buy. To find out more, do some homework ahead of time, so that you can approach the foreclosure auction with confidence and adequate financial backing.
Use knowledgeable resources like Bargain Homes to find answers to your foreclosure questions. Be patient, and don’t rush into the first opportunity that comes your way. Foreclosure properties are everywhere and more come onto the market each day. As you study how the process works, continue your hunt for the right investment to suit your needs, by dedicating some time each day to searching through real estate foreclosure listings in your area.
While you peruse the listings on sites like Bargain Network, also look for information, leads, and advice on financing.
Here are five powerful tips to help you finance foreclosure property:
Pre-qualify for a bank loan
Money talks. If you want to walk away with the property, show cash up front. Sellers respond when they have confidence that you can support your offer with prompt financing, so pay a visit to your mortgage lender before you shop for houses.
You can get pre-qualified in a matter of minutes, by showing a few documents and submitting to a credit check. And if you want to really up the ante, go ahead and get pre-approved for the loan, up to a certain amount. With a pre-approval letter in hand, you can open doors and have a distinct advantage over other competing bidders.
Assume the seller’s loan
If the terms of the loan allow it, you can take over the existing payments and solve two problems at the same time. 1) The strategy is good for the seller, who avoids foreclosure. 2) And as the buyer, you are able to simply cure the default and take over the existing loan without significant loan processing fees or delays. Veteran’s Administration (VA) loans are great in this respect – if you find an assumable VA loan you should definitely take advantage of the flexible option it represents.
Owner/Seller financing options
Owners who are faced with the dreadful possibility of foreclosure are usually happy to work with you, if it means they can save their credit from ruination. If you are able to take over their loan, it is a big help to them. In return for being rescued from a sea of debt, sellers will often accept terms that are very attractive to buyers.
For example, if you don’t have cash for a down payment, you can work out a deal with the seller so that they can stay in the house, rent free, for a certain period of time, in lieu of a down payment. Or you could offer them reduced rent, in exchange for their labor to help you fix up the place before you sell it, which reduces your remodeling costs.
Home Equity Loans
Sometimes the financial capital you need is right beneath your feet. If you own a home with accumulated equity, you might be able to find a great source of investment money without ever leaving home. Lenders will usually charge a slightly higher rate of interest for a second mortgage or home equity loan, but the interest and many of the closing costs are tax deductible, which offers extra savings over time. And once you secure the loan and buy your foreclosure property, you can always leverage the new piece of real estate as collateral and refinance to a lower interest rate.
Private lenders or investment partners
One of the most common arrangements in the real estate foreclosure business is partnership with lenders who have money to invest, but are not interested in doing the day-to-day work required to buy and sell property. You may have a colleague, friend, or family member with investment capital, and you can sit down and iron out an agreement to share the profits of your joint venture. They put up the money so that you can bid on foreclosures, and then you pay them back with a share of the proceeds when you sell the property and reap a capital gain.
You can also get funds from professional investors who lend money for a cut of the action. And if you have trouble getting a traditional loan from a bank, there are plenty of legitimate lenders who specialize in providing “hard money” loans, or loans with higher interest rates made to people who would otherwise be turned down.
Find a reputable lender through resources like Bargain Network, and you may discover that professional partnership can double your potential for success.
Foreclosure properties, REO (Real Estate Owned) property owned by banks and other lenders, and properties threatened with imminent foreclosure all represent great investment opportunities for property buyers. They are the most popular source of affordable deals for those seeking bargain homes, because foreclosures often sell at or below wholesale prices.
Anybody can buy this kind of property. Basically all you need is some money and a willingness to bid. But be aware that if you attend a property auction, you may wind up bidding against professional foreclosure investment specialists who are also looking for cheap houses. If you are unsure about how the foreclosure real estate game is played, learn as much as possible ahead of time in the Learn Section of Bargain Homes, so that you are not at a disadvantage when making your purchase offer.
Before stepping into the foreclosure property arena, it is important to educate yourself. You’ll want to know as much as possible about such things as the pitfalls of hidden costs. For example, when purchasing a house that has a lien against it, the buyer may be responsible to pay back that debt. Such strings-attached baggage can include huge amounts of money owed to the IRS.
And you will want to explore various ways to come up with the money necessary to finance your purchase of a foreclosure. Some lenders don’t lend money for foreclosure property mortgages, while other lenders are eager to make loans to help you buy. To find out more, do some homework ahead of time, so that you can approach the foreclosure auction with confidence and adequate financial backing.
Use knowledgeable resources like Bargain Homes to find answers to your foreclosure questions. Be patient, and don’t rush into the first opportunity that comes your way. Foreclosure properties are everywhere and more come onto the market each day. As you study how the process works, continue your hunt for the right investment to suit your needs, by dedicating some time each day to searching through real estate foreclosure listings in your area.
While you peruse the listings on sites like Bargain Network, also look for information, leads, and advice on financing.
Here are five powerful tips to help you finance foreclosure property:
Pre-qualify for a bank loan
Money talks. If you want to walk away with the property, show cash up front. Sellers respond when they have confidence that you can support your offer with prompt financing, so pay a visit to your mortgage lender before you shop for houses.
You can get pre-qualified in a matter of minutes, by showing a few documents and submitting to a credit check. And if you want to really up the ante, go ahead and get pre-approved for the loan, up to a certain amount. With a pre-approval letter in hand, you can open doors and have a distinct advantage over other competing bidders.
Assume the seller’s loan
If the terms of the loan allow it, you can take over the existing payments and solve two problems at the same time. 1) The strategy is good for the seller, who avoids foreclosure. 2) And as the buyer, you are able to simply cure the default and take over the existing loan without significant loan processing fees or delays. Veteran’s Administration (VA) loans are great in this respect – if you find an assumable VA loan you should definitely take advantage of the flexible option it represents.
Owner/Seller financing options
Owners who are faced with the dreadful possibility of foreclosure are usually happy to work with you, if it means they can save their credit from ruination. If you are able to take over their loan, it is a big help to them. In return for being rescued from a sea of debt, sellers will often accept terms that are very attractive to buyers.
For example, if you don’t have cash for a down payment, you can work out a deal with the seller so that they can stay in the house, rent free, for a certain period of time, in lieu of a down payment. Or you could offer them reduced rent, in exchange for their labor to help you fix up the place before you sell it, which reduces your remodeling costs.
Home Equity Loans
Sometimes the financial capital you need is right beneath your feet. If you own a home with accumulated equity, you might be able to find a great source of investment money without ever leaving home. Lenders will usually charge a slightly higher rate of interest for a second mortgage or home equity loan, but the interest and many of the closing costs are tax deductible, which offers extra savings over time. And once you secure the loan and buy your foreclosure property, you can always leverage the new piece of real estate as collateral and refinance to a lower interest rate.
Private lenders or investment partners
One of the most common arrangements in the real estate foreclosure business is partnership with lenders who have money to invest, but are not interested in doing the day-to-day work required to buy and sell property. You may have a colleague, friend, or family member with investment capital, and you can sit down and iron out an agreement to share the profits of your joint venture. They put up the money so that you can bid on foreclosures, and then you pay them back with a share of the proceeds when you sell the property and reap a capital gain.
You can also get funds from professional investors who lend money for a cut of the action. And if you have trouble getting a traditional loan from a bank, there are plenty of legitimate lenders who specialize in providing “hard money” loans, or loans with higher interest rates made to people who would otherwise be turned down.
Find a reputable lender through resources like Bargain Network, and you may discover that professional partnership can double your potential for success.
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