Real Estate Investing Weekly Wisdom #302 – Success Re-Defined!

Real Estate Investing Weekly Wisdom #302 – Success Re-Defined!

Dean just got back from a 3 day event Joe Polish hosts each year and took away soooo much!! The biggest golden nugget came while he was with Arianna Huffington (Creator of Huffington Post) and Brendon Bruchard (Author of the Charge.)

If you feel any of your life is out of balance, you have to watch this video right now. It’s time for you to have the success you deserve and we’re committed more than ever to make that happen for you.

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Need to Sell but Can’t? Turn Your Home Into an Investment Property

Need to Sell but Can’t? Turn Your Home Into an Investment Property
The real estate and mortgage crash did a lot more than just throw millions of homeowners into foreclosure or bankruptcy. It also threw many into underwater positions in their mortgages. They owe more than their homes are worth. Even if they’re not in a negative hole, many are not sitting on enough equity to sell without bringing cash to closing. The closing costs and real estate commissions can be as much as 7 percent of the selling price.

Articles have surfaced recently about “reluctant landlords.” These are homeowners who need to move for a job or other reasons and they aren’t able to sell their homes. They end up renting out the home with the goal of selling it as soon as they build enough equity to get out from under the mortgage. Some are lucky enough to rent for more than their mortgage payment, but many are taking on negative cash flow. Their mortgage payment is higher than the rent, and they’re paying to rent or buy another home when they move. This doesn’t have to be the case for many, because thinking of the situation as a business opportunity could bring better financial results.

If you’re in a need-to-move situation and can’t sell your home, you may be in better shape than you think. Throw off the negative thoughts and the “sell when I can” attitude and think like an investor. A few investor tools and tips can help you to rent out your home with better cash flow and some nice tax breaks as well.

  • Rents are high these days. — Trulia.com’s Rent vs Buy Report for the summer of 2013 shows that for most consumers it was cheaper to buy than to rent in all 100 metro markets covered by the report. That trend is for the most part still in place. They’re still not buying for many reasons, so the greater demand for rental units is causing rents to rise.
  • Study your local market rents. — With that in mind, study the rents in your local market for homes like yours. If necessary, call on some as a possible tenant and ask about the home. You should be able to do online research as well.
  • Pay attention to perks and features. — Check out rental ads to see which perks and home features are being advertised and how those property rents compare to others. Your home improvement projects may be just what today’s tenants want, and they’ll pay more for the right features.
  • Allow for repairs in the rent. — Of course you’re going to try to get as much for rent as possible, and hopefully more than your mortgage payment with taxes and insurance. Keep in mind that those repairs you may have done yourself in the past will now require a paid repair service call. Ask an accountant, but you should be able to deduct those repair expenses at year-end, which you couldn’t do when you lived in the home.
  • Breaking even could still mean a profit. — You can probably take depreciation on the home once it is converted to rental status. Like all tax rules, it’s complicated as the IRS explains here, but you can normally depreciate the cost of the structure (land value deducted) over 27.5 years. As an example, if your home less land value is depreciated based on150,000 cost basis, divide that by 27.5 to get an annual depreciation deduction of around5,454. That’s454/month off the rental income on which you don’t have to pay income tax. Talk to an accountant before making any decisions.
  • Consider a lease purchase arrangement. — This is more complicated, but could be well worth the hassle. Many people today would like to buy a home but can’t due to credit problems or lack of a down payment.
  • Offering them a lease with the option to buy at the end of a specified period of time, you can create a win-win situation.

  • They should take better care of the home if they expect to own it at some point.
  • You still get the cash flow and tax benefits of rental property investment.
  • You can structure the option to buy at a profitable price in three to five years.
  • You can get an upfront non-refundable option deposit that you keep whether they exercise their purchase option or not, and even if they move out before the lease ends.

Don’t think like a victim if you need to move and can’t sell your home. Think like an investor and business person and do your due diligence. You just may have been forced into a really great business decision!


Dean Graziosi

Statistics Do Not Buy Houses — People Do

Statistics Do Not Buy Houses — People Do
BMO Harris Bank has released the results of a survey indicating that 59 percent of homeowners expect their home value to rise over the next year.

Results of this survey could be telling us that there is pent-up demand for homes. Other survey points and some possible conclusions:

59 percent say their home values have risen over the last year.

This is good news if it holds up. Over the last year inventories have dropped, and continuing buying by investors is reported to be the major influencer of prices in the under $ 300k range. Most studies show nationwide that investors have purchased 30 percent or more of homes. In higher price ranges there has also been price appreciation with competition for shrinking inventory. As rising values bring more homeowners out of underwater territory, will there be an increase in listing inventory, and will demand keep pace? If not, we could be in for a period of seesaw price movement.

29 percent indicated they had to delay or end their home buying plans due to market activity.

The reasons for ending their plans isn’t stated, but it’s logical to conclude that they have been priced out of the market by recent price movement, low inventory, and competitive buying pressure. This group may be back if the economy and their financial positions strengthen, but if prices continue to rise, they may not gain enough ground to re-enter the market.

29 percent say they have sped up their timeline for buying due to current market activity.

This goes along with another survey response: 59 percent expect interest rates to go up, with 42 percent expecting a small increase and the other 17 percent expecting a large increase. Most of these are people able to afford a home and qualify for a mortgage. However, you can’t buy something not for sale. Inventories need to approach more normal levels, or this group may become frustrated non-buyers, or they may add to the bidding competition for available homes.

41 percent aren’t being influenced by current market activity.

This group says that current market activity hasn’t affected their home buying timeline. I see this group made up largely of “wait and see” buyers. They would like to buy a home, but the housing and mortgage crash makes them cautious, and with interest rates still low, they feel that there is time to be cautious. They’re also waiting to see if the economy improves and if they may see increased income to afford a better home.

Last year 21 percent experienced a loss in home value, but only 9 percent believe this will be repeated in the next year.

Optimism seems to be surfacing that the housing market has turned the corner, as the majority of homeowners who moved further into underwater territory last year do not expect that trend to continue in the coming year. For some balance though, 7 percent of those surveyed have given up on buying a home anytime soon due to current market activity. The good news is that 7 percent is very much a minority group.

So, what’s coming in the near term future?

Overall these survey responses seem to indicate a growing optimism about the housing market and home prices. From the BMO release: “Housing affordability remains historically very attractive, despite rising home prices and borrowing costs coming off their lows. As a result, there continues to be decent demand for homes, assisted from firming household formation.”

That last phrase is really important. Is household formation improving significantly? Even if it is, are these new households near term buyers, or will they add to the increasing demand for rental homes and higher rents? We investors are watching the market closely. Rental investors win either way. If rental demand stays strong, rental return on investment will as well. If the tide turns and buyers flood the market, it could be time to take profits and sell rental homes. Using the 1031 Exchange to defer capital gains and roll into higher priced rental properties could work well.

Survey results cited in this report are from a Pollara survey commissioned by BMO Harris Bank using interviews with an online sample of 2,500 Americans conducted between April 1st and 7th, 2014. The margin of error for a probability sample of 2,500 is ± 1.96%, and 250 is ± 6.2% 19 times out of 20.


Dean Graziosi

What Pet Works Best in Your Home

petPets are a wonderful part of the family and great companions, but they can cause a lot of damage to your home. Some are more destructive than others, so if you are considering selling your home any time in the near future, it would pay to know wich pets work best. Dean Graziosi has provided the following information on this topic.

Dogs and cats are among the most common pets, but they can cause quite a bit of damage to the home, especially if they mostly dwell inside. Dogs are notorious for chewing. Some chew shoes while others actually chew on parts of the home such as walls or part of the trim. This can cause significant damage to the walls that would require repairs before the house goes on the market.

Dogs can also scratch various surfaces in the home. These include walls, floors, and doors. Again, significant damage will require items to be replaced before the home can be sold.

Cats are a little less destructive, but many like to climb and scratch. While very few chew, the damage caused by claws can be quite costly to repair.

Other pets such as birds and rodents are caged so don’t pose as many problems to the actual structure of the house. They can, however, leave unpleasant odors behind as can dogs and cats.

So which pet is best if you are a homeowner? This is a tough question to answer. Some dog breeds are known for chewing and destroying items more than others. Likewise, it may be a good idea to house larger dogs outdoors in a comfortable environment where they will be free to run and play.

Before putting your home on the market, it is a good idea to de-pet it. This involves giving it a thorough cleaning and using special cleaners that are designed to remove pet odors.

Some insurance does offer protection against accidental damage caused by pets, but this will come at an additional cost. Still, it might be well worth it in the end to do so. Note, however, that the rules on this are quite specific, and some companies won’t replace household items damaged by pets.

Work with your pets to ensure the minimal amount of damage is caused. this can be difficult, but is possible in some instances. For example, a dog can be trained not to chew if this bad habit is caught when he is a tiny puppy. Waiting until he gets older to try and break him of this habit probably won’t result in success. As an article posted on Money Supermarket points out, the best way to avoid the need to make an insurance claim is to train your pet so these incidents don’t occur.

Being a pet owner is a big responsibility and should be taken seriously. You can read more about real estate by visiting Dean Graziosi’s website.

Alternative Property Types for Investors to Consider

rental

 

 

Real estate investors are always searching for great opportunities. There are, of course the obvious choices: homes, apartment complexes, and residential office space, but there are other investment alternatives that should definitely be considered. Dean Graziosi has provided some useful information on this topic below.

 

Luxury Apartments

Apartment complexes have long been a great income source for investors, but luxury apartments have become quite popular over the last several years. One trend is to build small apartments with luxury features and offer them at or above market rate. This way, renters can have the latest features at a price they can afford. This seems to be trending with the single working professional.

Farms

Land has always been a lucrative source of investing. Add a house and you have a property that has real potential. The more acreage you have, the more developing you can do to it. Even just having the farm land itself can really pay off in the future. According to an article posted on nreionline.com, farms have taken a backseat to more lucrative real estate types, but perhaps they should be considered again.

Senior Housing

Senior housing has become a necessary consideration for an investor. There are many great opportunities to be found by developing a new complex. While apartments are commonplace for the investor, senior housing opens up new and interesting opportunities. As with regular apartment complexes, options can range from low-income to luxury units and from very small to quite spacious.

Unique Office Space

While it is common for investors to turn homes into businesses, some are now using a unique approach to creating office space for entrepreneurs to rent. Many small business owners and independent contractors who are searching for office space relish the opportunity to save money by renting these smaller domains. Investors can buy homes and renovate  several different rooms for office opportunities. Another take would be to rent out each floor of the dwelling to separate tenants who need a small, private space all their own.

Commercial Real Estate in Remote Locations

There are some professionals who would need commercial real estate that is located in a more remote location. A recording studio owner, for example, would not choose to rent commercial space that is in close proximity to other businesses as this would disturb the other business owners around him. He would also be disturbed by the noise level nearby. Because of this, many recording studios are found in more remote locations away from traffic and other disturbances. Finding an older building in an out of the way commercial district would be a great option for the business owner who requires a tranquil setting to get the job done.

There are plenty of traditional and nontraditional options for the real estate investor. The key is finding a niche that works and investing wisely. See Dean Graziosi’s blog for more real estate topics.

How to Increase Storage in Your Garage

garageThe garage is typically the place where things get dumped and thrown about.  But, if you’re tired of navigating through boxes and storage bins to get to your car, it may be the perfect time to make your garage a more functional and easier to access area.  Dean Graziosi has listed some ways in which you can increase storage in your garage and actually be able to use it as more than a dumping ground.

The first thing you can do is to organize your tools, gardening items, and miscellaneous items for storage.  By placing items that are often used for gardening in one area of your garage, not only will they be easier to find when you need them, but they will also not get damaged.  If you have a lot of larger, bulky items, you should store them by their function.  This will help you know where they are and keep them from taking up unnecessary room in your garage.  There are a number of ways in which you can hang smaller items on your walls.  Installing wall storage racks can help you store your smaller hand tools in one place.  You can also attach bins that will be ideal for storing screws, nails, and other smaller items that are often lost.

If your garage is large enough, you may want to consider installing cabinets.  This is a great way to store chemicals, paint, and tools.  By installing cabinets on the floor, as well as the walls, you will be able to create a work surface that will allow you to make repairs to machinery or simply work on projects.  Low cabinets with sliding drawers will allow you store specialty tools, or simply tools that you tend to use more often.  Cabinets are a great way to make your garage easier to use and are a great way to store your tools and keep them from becoming damaged, states Dean Graziosi.

To keep your garage floor free of clutter, one of the best ways is to store sports gear and garden tools on your wall.  Homeowners can purchase hooks and racks that can be installed on garage walls that allow homeowners to hang snowboards, skis, weed trimmers, shovels, and other large items that may have been previously strewn about on the garage floor.  If you have a lot of yard tools or sports equipment, this may be the ideal storage method for you.

There are a lot more storage options available for homeowners now than ever before.  If you have grown tired of tripping over shovels, and sports equipment, it may be time for you to consider increasing and improving the storage in your home.

Moving With Children

children

 

You’ve finally found the home of your dreams and ready to start the moving process, in addition to packing and planning your move, one of the hardest things may be preparing your children for the move.  Whether your move is to another city or simply to the next block, your children may not be thrilled at the idea of moving.  To help you make the move easier on your children, Dean Graziosi has listed some helpful tips to help reduce the anxiety your children may be experiencing.

 

  • Share – The sooner you share your plans to move with your children the more time they will have to come to terms with the idea.  You should also share the reason behind the move and let them know that you are excited about the prospect of finding and moving into a new home.  This will help put them at ease, and show them that it is a fun process and should be seen as an adventure.
  • Ask For Their Thoughts – If your children are older and understand the process of viewing and comparing different home, you should definitely include them in the process.  Once you have narrowed down the choices to a few homes that you are interested in, ask for your children’s thoughts about each home.  If your move requires you going to another state, show your children pictures of the homes and when possible let them view online virtual tours of each home.  Let them see each of the rooms, and ask which one they would like to be their room.  This will allow your children to feel involved in the process and not like it is something being forced on them.
  • Get Rid Of The Clutter – Share with your children that now is the ideal time to get rid of any clutter or unused items they may have.  You can also enlist their help in other rooms of the house.  Having your children go through each room with you and asking them what they believe should go, gives them a feeling of importance and that their opinion does matter to you.  During the process, you should also let them know that it is okay for them to keep any items that have a special meaning to them.
  • Plan A Moving Sale – After you and your children have gone through your home and found items to discard, you may want to plan a moving sale.  Your children can help you sort and price everything before the sale.  You can then use the proceeds from the sale to purchase something that the children may have been wanting.

Moving can be one of the most stressful events of anyone’s life, it can be especially more stressful for those who have children.  Mr. Graziosi recommends that the more you include your children, the easier the process can be on them.