Financial Freedom Through Self-Sufficiency

Is Now the Best Time to Acquire a Rental Property?

noreply@blogger.com (HouseWealthy.com) — Sat, 11 Apr 2009 19:54:00 +0000

In the last few weeks we have witnessed an encouraging uptick in the stock market and housing markets. It may be a sign of a bottoming out process, but who knows. One thing that is certain, mortgage rates have never been this low since we began tracking mortgage rates.

Sub 5 percent mortgage rates on 30 year fixed loans are literally unheard of, but we are now experiencing them. Couple that with a more affordable housing market and this may be an opportune time to consider picking up a rental property. Such a move may payoff for you in five years and beyond, once we get out of the financial mess we are currently in. A rental property near major transportation and employment hubs will set you up for when the economy turns around. Homes located in these areas will be in higher demand.

Since it is still a buyer's market, you can request that sellers (if they are not bank-owned properties) do some repairs before the settlement date. This will reduce the amount of work you will have to perform to get the house in rentable condition. Also, don't forget to perform a home inspection to access the condition of the house. It is now the buyer's turn and you should be as choosy as possible.

If you are a first-time home buyer who does not need a lot of space, you may want to consider purchasing a duplex or 2 family home. The extra rental income can never hurt and will allow you to depend less on outside sources of income, while turning your primary residence into an income producing asset.

We can't tell for sure if this is the bottom of the housing market, but either way, it is surely a great position to be in as a buyer.

HouseWealthy.com has been redesigned

noreply@blogger.com (HouseWealthy.com) — Tue, 24 Feb 2009 00:48:00 +0000

The main website for this blog www.housewealthy.com has been totally redesigned. In addition to covering real estate wealth building topics, it will also offer discussions, forums, tools, methods, and techniques for gaining financial self-sufficiency through utilizing residual income and renewable energy.

Everyone wants control of their financial well being, but the means to gain control seems to be more elusive than ever. The path to fiscal stability is moving further out of reach. One thing the recent financial turmoil should be teaching us is that we can no longer depend on our employer, 401ks, or stocks to take care of us. We must become "HouseWealthy", which means we must create and grow our wealth in-house and not be solely dependent on the increased risk of outside sources.

Please visit the newly redesigned main website (www.housewealthy.com) and leave us a comment. You can also register and post a question or tip for other users to answer or comment on.

How to be Financially Self-Sufficient in Today's Uncertain Times

noreply@blogger.com (HouseWealthy.com) — Fri, 12 Dec 2008 22:45:00 +0000

We have gone through some of the worst financial conditions that have been seen in the last 70 years. Everything from stocks, home values, savings rates, consumer spending, and all types of businesses have suffered greatly from the recent events. There seems to be absolutely nothing that is considered a good investment these days.

In the past, if one investment sector had a downturn, there was always another that would pick up the slack. For example, when stocks plunged from a combination of the tech bubble and the 9/11 terrorist attacks, the real estate boom picked up the slack and money funneled into that sector. Initially, as real estate quickly cool in 2007, the thought was that stocks could start to pick up some of the slack. That line of thinking did not work this go around, as the severity of the real estate crash has affected everyone and everything. The biggest impact has been the tremendous loss of jobs, since this is the driver for consumer spending and the GDP heavily depends on the consumer. This is not just a domestic problem, as the new global economy has intertwined the fate of many international economies.

The thought of being self-sufficient is relevant now more than ever. The ideology of depending on your employer, pension, and 401k plan is becoming more and more archaic as layoffs have put many out of work and individuals near retirement have seen there coveted 401k plan cut in half in less than one year.

Below are few ways that one can become self-sufficient:

1. Live off of interest
Certificates of Deposit (CD) and Bonds are ways of accruing interest with little to no risk on the part of the investor. If you have a relatively large sum of money saved, either from a 401k or investments, this money can yield good, safe returns from a CD yielding 6% - 7%. For example, $500,000 invested in a 7% APY CD for 7 years will yield about $2,916.66 per month. If allowed to compound over the 7 year period, the initial $500,000 investment will become $814,997.03. This is a risk-free investment. The best CD rates are not found at the major banks, as sites like Bankrate.com would have you believe. In actuality, the best rates are found at small local banks and credit unions. The website bankdeals.blogspot.com is a site that I often use to find the best CD rates across the country.

2. Live in a property that has a rental component
Many of the people that purchased the McMansions during the real estate boom years are either now in foreclosure or struggling to meet their ballooned monthly payments. Living above ones means has been the American way of life because everyone assumed that the economy would continue to grow, houses would continue to appreciate, jobs would continue to give great raises, and net worths would continue to rise.

Since this is obviously not the case now, a great way to supplement your income is to live in a property that also has a rental component. This could be a small apartment building with 3 – 4 units. You could live in the largest unit and rent out the others. This could also be a single family home that has a legal rental unit in the basement. Depending on the type of property that you live in, the rent that you charge your tenants could cover all of your housing expenses. This is a great way to create monthly income that is more resistant to external economic conditions.

3. Utilize solar/wind power
The cost of installing solar panels on your roof or a small windmill in your backyard is becoming more and more inexpensive. Once the initial investment is made, it can take 5 – 7 years to break even, but after that, you will be able to generate free electrical power for your home from the abundant energy of the sun and/or wind. In these times when the cost and source of our future energy is so unknown, this kind of investment can prove to be a way to liberate yourself from the total mercy of the utility companies.

If you have other ideas of ways to live self-sufficiently, please provide us with your comments.

Is real estate investing coming back?

noreply@blogger.com (HouseWealthy.com) — Mon, 05 May 2008 12:27:00 +0000

I have been on the lookout for some new real estate investments during the last few months. Most of the time, I have been met with unrealistic prices and expectations from the sellers. They still dream of the good ol days of 2005, where they could pick a number out of the sky and watch multiple bids come in.

But now, things seem to be slowly coming back to earth. Whether it be a short-sale, or more favorably a seller that just needs to get out of a property, prices are starting to get to the levels where investors can consider coming back in and establishing sound rental properties. Based on the dynamics of the still depreciating market, rehabbing may be a little ways off, but rentals are starting to look attractive.

I looked at a few houses this weekend in the D.C. metro area and after running the numbers, there are a couple that will receive offers. Of course, they will not be at asking price. I still believe that offers should be at about 80% of asking price, depending on the property, and especially as an investor. In a declining market, you do not want to be caught holding someone else's bag at an inflated price. I have a few friends that bought in early 2007, thinking that they were getting a "deal", only to see prices sharply fall after the so-called subprime meltdown around August 2007. Although, I believe the brunt of that meltdown is behind us, it is very important to still stick to the numbers and not compare anything to the levels of 2005 and 2006.

This market is starting to look encouraging for the investor again. Just make sure the numbers work and you do not buy on emotion.

2008 Spring Real Estate Market

noreply@blogger.com (HouseWealthy.com) — Thu, 13 Mar 2008 17:51:00 +0000

For the past couple of Spring seasons, the real estate market has been in a slow, steady decline. Prices stopped rising at the breakneck pace that we have become accustomed to during 2001 - 2005. Based on that frame of reference, any reversal in appreciation started to look like the deal.

But something seems different about the coming Spring of 2008. I am beginning to see price reductions unlike what has occurred in the past 2 years. It seems like the true reality of the real estate market is finally starting to sink in. I have witnessed price reductions of 25% to 50% of previous purchase prices, which was usually during 2005 - 2006. You may be wondering how a homeowner is able to take such a hit to unload a home. Well, it is not the homeowner directly taking the hit. These steep discounts have been due to what are called short sales. A short sale is when a lender agrees to sell a home at less than the mortgage balance, just to write-off the loss and avoid a costly foreclosure. The homeowner avoids going into foreclosure, but may have other tax implications connected to the sale of the home. These short sales are becoming more common as foreclosures rise and are offering significant discounts for buyers.

Anyone in the market to buy a home should consider concentrating on these short sales in order to get the best value for their money. No one truly knows how low home prices will fall, but they are definitely hitting very attractive levels for the savvy buyer.

Jumbo Loan Rates Set to Fall

noreply@blogger.com (HouseWealthy.com) — Sat, 16 Feb 2008 18:35:00 +0000

Congress has just passed their economic stimulus plan that is supposed to put money in everyone's pocket so they can go out and boost the economy. This is the highlight of the plan, but it also covers another important provision that will be good news for homeowners and potential homebuyers.

The conforming loan limit that is insured by Fannie Mae and Freddie Mac is $417,000. Fannie and Freddie are the government companies that buy and package mortgage backed securities from banks. Any loan amount over $417,000 is considered a jumbo loan and is not insured by these entities. Ever since the subprime fallout, these jumbo loans have become expensive and average about 1.25 percentage points higher than conforming loans. Wall Street is very reluctant to purchase these securities since Fannie Mae or Freddie Mac does not back them.

The stimulus plan will instate a temporary increase in conforming loan limits to about $729,750, depending on your location. This means that these higher balance loans can now enjoy the same low rates as conforming loan amounts. But this increase will only last till the end of 2008, so interested parties must act quickly.

In my opinion, this is the best part of the stimulus package. It will allow struggling homeowners to save from $200 - $400 every month by refinancing their high balance loans. Let's hope that Congress considers making this increase in the conforming loan amount a permanent fixture.

2008 Refinance Boom May Be Looming

noreply@blogger.com (HouseWealthy.com) — Sat, 02 Feb 2008 15:45:00 +0000

With the slowing economy, talks of recession, the tick up in unemployment, and the volatile stock market, the 30 year fixed rate mortgage has slowly continued to drop. A couple of weeks ago, the Feds finally took steps to combat the signs of recession by cutting the Fed rate by a combined 125 basis points. Usually the Fed funds rate has little to do with fixed rate mortgages, but it usually does not take long for fixed rates to follow the trend.

Long-term mortgage rates are already low and may go lower. Usually when the economy faces a possible recession, these rates drop. We all remember what happened to rates from 2003 – 2005, after the 2001- 2003 recession. So, if history is any indication, there is a good possibility that rates can fall further. This is good news for potential buyers, but even better news for current homeowners with decent credit that want to refinance out of ARMs or higher rate fixed mortgages.

Rates have not been this low in a long time, and it may be worth investigating whether you can benefit from this low rate environment.

Home Staging Helping Today's Home Sellers

noreply@blogger.com (HouseWealthy.com) — Mon, 07 Jan 2008 03:01:00 +0000

In order to sell a home in this market you must have a property that is in good condition and well priced. But one area that is often overlooked is presentation.

Professional home stagers have been receiving more business and have helped increase the likeliness of a home selling. Prospective buyers want to be able to picture themselves in a home. A house with too many personal items or unique features will make it hard for a buyer to see themselves in the home.

In order to cater to the variety of potential buyers, you should make your home as neutral as possible. This would include neutral furniture, paint, artwork, etc. You don't want to offend any prospective buyers.

2008 Real Estate Outlook

noreply@blogger.com (HouseWealthy.com) — Mon, 07 Jan 2008 02:55:00 +0000

Another new year has come and we are all looking forward to what it may have in store for us. This is true if you believe in New Year's resolutions or not. This may be especially true for all of the potential homebuyers out there. As most waited out the market shifts of 2007, 2008 may be the most favorable time than ever to dive into the market. There are currently some really nice deals out there, which has been absent from the market for a long time. Current home sellers are a bit anxious and the usual slowdown in sales that the winter months bring will accentuate this fact.

As always, no matter what the sale price may be, it is always best to negotiate within reason. This goes for owner-occupants as well as investors. You must also be looking to hold the property for at least the next 4 - 5 years. This is definitely not the time to consider rehab projects if you are an investor. Good, solid long-term rentals would be a better strategy. Normally, real estate cycles last for about 5 years. This would theoretically put us somewhere near the bottom of this current cycle. So 2008 may be the year for the homebuyer.

As for lending, FHA is back in favor again and should be considered especially if you are a first-time buyer. Their website www.fha.gov lists the loan limits for different areas around the country. If 2008 brings better loan programs that will allow more buyers to afford homes, we may see better sales a little sooner. The subprime mortgage crunch was one of the major factors that contributed to the drop in home sales for most of 2007.

Simple Tips for Controlling Mortgage Cashflow

noreply@blogger.com (HouseWealthy.com) — Tue, 20 Nov 2007 00:57:00 +0000

Since we are in the middle of rising mortgage rates and potential foreclosures, I want to suggest a few ways for folks having cash problems to avoid potential disaster.

The number one rule is not to close your eyes and ignore the problem that you are having. It is best to read the signs and address problems that you see coming down the road. The biggest mistake would be to allow yourself to make late mortgage payments. That will virtual eliminate about 90% of the solutions you would otherwise be eligible to receive.

If you have an adjustable rate mortgage that you know will reset soon, pull out the paperwork and find out what new rate is due to adjust. Refinance ahead of time, because mortgage rates are pretty low right now.

Also, if you have consumer debt (e.g. car loans, credit card balances, etc) that has a high interest rate (8% - 20%), you can consider paying off those loans with a cashout refinance. This only works if you have enough equity in your home. This strategy will give you a fixed mortgage rate and reduce your total monthly obligations.

The Federal Housing Administration (FHA) loan is also making a comeback. While most lenders require that you keep 20% equity in your home on a cash-out refinance, FHA will allow you to keep just 5% equity in your home. This results in a much larger cash-out refinance.

With the squeeze in credit availability and the rise in consumer monthly payments, these suggestions should help you to manage your monthly cash flow.

Basics of a Reverse Mortgage

noreply@blogger.com (HouseWealthy.com) — Tue, 20 Nov 2007 00:53:00 +0000

Reverse mortgages are starting to grow in popularity. In general the borrower must be over 62 years of age. This type of mortgage allows the borrower to receive monthly cash payments by tapping into their home's equity every month.

The mortgage interest that the borrower will usually pay is added to the balance of the reverse mortgage. So the debt against the property increases each month. Most reverse mortgage programs do not have income qualifications. A retiree with no income can qualify. The interest varies and can fall between 6 percent and 9 percent. The closing costs for a reverse mortgage are generally higher than with a regular mortgage refinance $15,00 - $20,000). The lender may also may keep the appreciation accrued in the home once the borrower passes, even if this appreciation is more than necessary to cover the remaining mortgage balance.

In my opinion, reverse mortgages are only good for individuals that do not have an income. If a retiree has some sort of income, a home equity line of credit (HELOC) may be a better choice. They have much lower closing costs and allow you to keep all of the remaining equity in your home, which allows you to pass it to your heirs.

Buyer's leverage increases

noreply@blogger.com (HouseWealthy.com) — Thu, 18 Oct 2007 02:08:00 +0000

We have been in a buyer's market for more than a year now. Since the buyer's market began, buyers have gained leverage over sellers in negotiations.

Over the past few months that leverage has grown even more substantial because sales have continued to decline while inventory has risen. The problem now is that as inventory rises, sellers have put a lot of "junk" houses on the market. These houses that are in poor shape are usually listed at or close to the price of homes that are updated. Many of these "junk" homes are unrenovated investor properties or foreclosures. Since most homebuyers look at the cheapest homes in a neighborhood first, they are forcing the owners of updated homes to list their properties at or close to the price of the homes in poor shape. This again plays to the advantage of buyers that are actively looking.

In my opinion, this winter holiday season will be the most optimal time to buy this year. This should continue until about February of 2008. We may then see a slight bump in home sales as the spring season nears. For those in the market to acquire a home at a discount, the slow holiday season is the best time to make a deal.

Sellers must disclose defects in "as-is" sale

noreply@blogger.com (HouseWealthy.com) — Thu, 18 Oct 2007 02:01:00 +0000

In this currrent market, there are a lot of properties listed as "as-is" sales. Many buyers are not clear on the meaning of "as-is" and what it may imply.

Selling "as-is" does not protect a seller who lied about the condition of the property or who concealed huge faults that the buyer could not see. They must still disclose "known" defects in the property, they are just not obligated to make any repairs before the sale is finalized.

When buyers take property in as-is condition, they acknowledge that they realize what repairs are needed and have offered below market pricing. But they have not agreed to accepting hidden defects in the condition of the property.

Refi your Subprime ARM into an FHA Loan

noreply@blogger.com (HouseWealthy.com) — Wed, 12 Sep 2007 13:43:00 +0000

Last week, President Bush introduced a plan called the FHA Secure Initiative. This plan will enable homeowners to refinance various types of ARMs that have recently reset, and/or are delinquent into FHA loans. A Federal Housing Authority (FHA) mortgage is a government insured loan. Since it is backed by the government, the rates and terms are usually much more favorable than a regular conventional or subprime mortgage. These loan also have FIXED rate 30 year terms.

This is important news for homeowners out there that have ARMs that are due to reset or are currently struggling to pay the higher interest rate on ARMs that have already reset.

Here are the important points of the program:
- The mortgage being refinanced must be a non-FHA ARM that has reset.
- The mortgage payment history, during the 6 months PRIOR to the reset must show no late payments.
- Late payments made after the loan has reset ARE acceptable.
- In many cases homeowners may wrap late mortgage payments into the new loan.
- There must be sufficient equity for FHA to insure the mortgages that include missing mortgage payments.

This temporary initiative will expired on December 31st, 2008. Please contact me for more details if you feel you can benefit from this exciting initiative.

Where did all of the Mortgages Go?

noreply@blogger.com (HouseWealthy.com) — Wed, 12 Sep 2007 13:40:00 +0000

The subprime crisis has been all over the news for the past few months. Every week, it seems like a handful of former high-flying mortgage companies are either shutting down operations or laying off numerous employees.

This has caused a ripple effect throughout the industry and it is now harder than ever to acquire a home mortgage. Many programs that once ruled during the real estate boom are now no longer available. Many lenders are also increasing minimum credit score requirements and getting rid of "state-income" and "no-doc" loans. Nowadays the majorities of buyers have to possess good credit, low debt to income ratios, a healthy down payment, verifiable income, and be looking to finance less than $417,000.

There are still many good programs out there but you really need to search hard for them. The best advice for someone looking to refinance in the near future is to pay your mortgage on time. Late mortgage payments (within the last 12 months) in this market will almost guarantee that you will not qualify for ANY loan.

Market Update

noreply@blogger.com (HouseWealthy.com) — Tue, 17 Jul 2007 03:13:00 +0000

It has been a couple of months since I have sent out a newsletter. I have been out of the country for a while and just returned last week. From what I see the housing market is still slow, which of course is beneficial to potential buyers.

The National Association of Realtors has pushed back the potential for price recovery to the 2nd quarter of 2008. There is an wide selection of homes available on the market today. My website, www.housewealthy.com covers many techniques that buyers can use to negotiate the best price in this market.

With historically low mortgage rates this summer and sustained job gains, it could be a good time for first-time buyers with long-term plans to test the housing waters.

Is Your ARM hurting?
More than two million subprime adjustable rate mortgages (ARMs) are about to reset at much higher rates in the next few months. Many buyers took out 2 and 3 year ARMs in 2004 and 2005 which offered low "teaser" rates. Once these mortgages reset, their payments may balloon more than 30%.

With mortgage lending standards getting tighter, it is important to take advantage of refinancing into a more stable mortgage product before the loan payments increase. It is important to take a look at your credit rating and plan to get out of these loans ahead of time.

An inability to qualify for a stable loan product may force you to sell your home (if you have equity) or lead you to foreclosure once the payments rise. This October alone more than $50 billion in ARMs will reset, according to Economy.com. They report that this will be a historic record. If you currently have a short-term ARM that is about to reset, feel free to contact me to discuss your options. Taking a proactive approach now may help prevent future financial strain.

This Week's Carnival Of Real Estate Investing

noreply@blogger.com (HouseWealthy.com) — Mon, 30 Apr 2007 14:30:00 +0000

This is my first time hosting the Carnival of Real Estate Investing and I am pretty excited to be participating. I went to the Penn Relays in Philadelphia this weekend to watch some of the best Track and Field athletes compete in sprints, field events, and distance running. As I watched the events, I couldn't help but find a link between real estate investing and the races.

I watched the sprints and noticed that the athletes trained to give a maximum effort for 10 - 45 seconds and then the event was over. This is similar to the real estate rehabber. They acquire a property, renovate it for 1 year or less and then try to sell for maximum profit.

The field events showcased athletes that combined athletic ability with very specific technical skills. This is similar to the real estate investor that specializes in short sales or preforeclosures. They rely on learning specific techniques and approaches to create their success in real estate.

The long distance runners train hard to increase the stamina and endurance that would allow them to finish their 1 mile to 3 mile race ahead of the pack. The long-term landlord is very similar to the distance runner. They have the buy and hold mentality that leads to real wealth in real estate.

Now for the results of this week's Carnival of Real Estate Investing. After reading all of the entries for the week, I struggle between two post for this week's best but decided to choose Robert Phillips presents How to Handle Sellers in PreForeclosure posted at REAL ESTATE INVESTING. I liked it because it gives a great practical example and short script to use when approaching homeowners in preforeclosure. So this week the "field event" wins the Carnival of Real Estate Investing!

Fred De La Riva presents Don't Let Your Clients Fall Prey to the Gurus posted at Working with Real Estate Investors was a very close second. It is a great post that highlights the pitfalls that newbie investors may fall for when listening to so-called "Gurus".

Here are the other 9 honorable mention posts in no specific order:

Joshua Dorkin presents What was your biggest fear or concern in starting real estate investing? posted at Real Estate Investing For Real | A BiggerPockets Investment Property Blog.

Anesia Springborn presents Improve Cash Flow With Last Month's Rent posted at TheLandlordBlog.com.

Paul presents Real Estate Vs Stocks - Again posted at ExtremePerspective.

John Barker presents John Barker's Mortgage Blog: How does the Subprime Crisis Affect My Home? posted at John Barker's Mortgage Blog.

edithyeung presents How to Analyze Real Estate: Single Family Homes (SFH) posted at Stewart Hsu.

Nigel Swaby presents Real Estate Investing - Is It Time to Adjust? posted at Salt Lake Real Estate Blog.

Silicon Valley Blogger presents Stocks Vs Real Estate, Winning Investment Strategies posted at The Digerati Life.

Jeff Brown presents An Example ? How To Answer A Client?s Question posted at BloodhoundBlog.

James Klobasa presents My Friends All Thought I Was Breaking The Law?And Going To Jail?Until They Saw The Cheques Rolling In! posted at Real Real Estate Investing Blog.

Possible ARM Swapping????

noreply@blogger.com (HouseWealthy.com) — Sat, 21 Apr 2007 21:06:00 +0000

I recently read an article on Money Magazine's website that addressed the possibility of the government and lenders allowing some borrowers with ARMs to swap them out for fixed rate mortgages.

Speakers at a Congressional hearing of the House Financial Services Committe called for restructuring ARM loans to help solve the subprime crisis.

A Congresswoman from Ohio (which apparently leads the nation in the foreclosure rate) recommended the following three-prong approach:

- Establish a rescue fund for short-term problems casued by illness, layoffs, or other one-time events.

- Create a bond fund to pay for switching borrowers out of unaffordable ARMs.

- Refinance loans for victims of predatory lending.

These measures also calls for lenders to agree to modify the terms of existing loans to prevent the higher costs of foreclosing on properties. This suggestion may work because it costs more to foreclose on a property than to accept lower returns on existing investments. According to the article 10 to 15 percent of the value of a property may be eaten up by the foreclosure process.

If it could be pulled off, this may be very helpful for the housing market as a whole as well as the economy.

Here is the link to the original article Subprime solution: Swap ARMs for fixed-rates.

MyCommunity Mortgage: A Subprime Alternative

noreply@blogger.com (HouseWealthy.com) — Wed, 11 Apr 2007 19:07:00 +0000

MyCommunity Mortgages: which are sponsored by Fannie Mae and is designed to assist low and moderate income families, public service employees, and disabled people to realize their dream of owning an affordable home. This program allows for 100% financing and little to no money required into the transaction for those who qualify.

I can't stress enough how great this Fannie Mae sponsored program is. It allows certain borrowers to qualify for a home with no money down and less than perfect credit. It is a great alternative to some of the subprime loans that are now disappearing from the marketplace. The best feature of this loan program is that it offers a low interest rate that is fixed over 30 or 40 years, not just 2 - 3 years like the average subprime mortgage. Most subprime borrowers aren't getting in trouble because of their initial interest rate. Most of the trouble comes when these short-term ARMs reset and payments skyrocket by $300-$500 per month.

A sensible borrower can combine this loan with some of the techniques that I cover in my How To Afford a Home with Little Money blog and should be able to comfortably afford the home of their dreams.

Professional Stagers Help Home Sales

noreply@blogger.com (HouseWealthy.com) — Mon, 09 Apr 2007 18:31:00 +0000

I recently commented on the increase in business for the home inspector in this buyer's real estate market. The professional home stager is another real estate business that is seeing a resurgence in activity.

This Spring will see an increase in homes on the market and each seller needs to get every competitive advantage available to them. The setup, look, feel, furniture, smell, and lighting of your home could have a more positive effect on a potential transaction than a lower sales price. Homes that are cluttered with children's toys and/or pet odors or hair may be hurting their chances of getting an interested buyer. With so much inventory on the market, it is easy for a buyer to move on to the next property.

Sellers may consider hiring an accredited professional stager (ASP) who can help them direct a potential buyer's attention to the highlights of the home. For an average cost of less than $2,000, a home stager will make sure items that could be seen as objectionable to potential home buyers are noted and addressed. They are also able to stage your home based on your target audience. A large home with many bedrooms and bathroom should be staged for a buyer with a family. A smaller home or condo should be staged to appeal to a young professional or empty nesters. Homeowners with young children should try to neutralize the smell of diapers by utilizing effective deodorizers, don't just mask the smells, deodorize them.

In addition to using a professional stager, hire a professional cleaning service to thoroughly clean the home to its optimal potential. Professional cleaning services have also seen a huge rise in business. In this new buyer's market the first impression will have a lasting effect and if it isn't good, it may take another few months to get another interested buyer.

Subprime Woes Affect Us All

noreply@blogger.com (HouseWealthy.com) — Thu, 05 Apr 2007 00:48:00 +0000

We all know that the woes of the subprime market has now made it difficult for a good number of the population to obtain mortgages. Most of the 100%, no money down, no credit needed financing are now disappearing.

Those of us with good credit may be thinking that "this won't affect me". Or maybe you are laughing at the people that took these loans and are now suffering the consequences of 2 year ARMs that are increasing by over 3% in interest rate. To make matters worse, these homeowners can't even refinance their homes because similar subprime loans are no longer available. In addition, their credit is not good enough to go "prime", so for many the only option is foreclosure.

Well, the demise of the subprime market has some ripple effects on the rest of the market. For one, the tightening of the subprime standards has also resulted in tightening of prime standards. So even if you have a 720 credit score, most lenders are not offering 100% financing in any form. They are also padding interest rates to offer extra insurance in the event of a loan defaulting. The subprime market offered high margins and now with that profit going away the prime loans will begin to become more expensive.

Even if you already have a 30-year fixed principal and interest mortgage your home value may be affected. Your neighborhood may contain a few homeowners that have subprime mortgages and may be facing foreclosure. Each foreclosure sale in a neighborhood inherently bring the total property value of the neighborhood down. Hopefully the casualties of the subprime meltdown will not be too bad. I guess the silver lining is that the buyers able to qualify for home mortgages will be in a much better position to negotiate prices.

Seek an "Educational" Mortgage Broker

noreply@blogger.com (HouseWealthy.com) — Mon, 02 Apr 2007 00:38:00 +0000

There has been plenty of news on the demise of the subprime market and how certain unscrupulous loan officers/lenders preyed on the following individuals:

1. Elderly
2. African-American
3. Low or Fixed Income
4. Women

In my opinion, these loan officers/lenders are a disgrace to the business and make it harder for the honest ones that truly have a passion for real estate and helping others. The best piece of advice that I can offer a consumer is too seek a mortgage broker, loan officer, or lender that is dedicated to educating you on the product that they are selling you. If it seems like they are too eager to close the deal quickly or have a sudden sense of urgency, then they may not have your best interest at heart.

A good mortgage broker will take the time to thoroughly explain anything that you may not understand. They should also offer a solid contingency plan if you acquire a short-term ARM or other so-called "exotic" mortgage product. A mortgage can be key to systematically building your wealth if used properly, otherwise it can be an equity-stripping, wealth-reducing nightmare.

I think this video from CNN sums up a lot of what has been going on during the last couple of years. Click here to view the video.

Beware of the "Trigger List"

noreply@blogger.com (HouseWealthy.com) — Fri, 30 Mar 2007 16:54:00 +0000

Have you ever applied for a mortgage and all of a sudden get a swarm of calls from other lenders the next day promising to give you a better deal? This phenomenom occurs because the credit bureaus (Equifax, Experian, and Transunion) sell your information for a pretty penny and other lenders can buy this information on a daily basis.

With the cooling of the hot real estate market, many lenders are investing heavily in this type of lead generation for business. It is very attractive to lenders because for the most part, all of the leads are currently in the market for a mortgage. The "lead" is generated when your current lender pulls your credit. This is one of the most sought after lead and the credit bureaus charge a premium for them.

As a consumer, you are open to shop around as much as possible. Just be carefully of the "bait and switch". The competing lender can dangle falsely discounted rates and terms just to gain your business. After weeks of going through the process, they can change their tune and can either leave you with a higher cost loan or no loan at all.

If you would like to opt out of any potential prescreened credit solicitations, which includes mortgages, credit cards, etc .... you can visit www.optoutprescreen.com. According to the Federal Trade Commission (FTC) your request should be processed within five days. However, it may take over 2 months for calls to stop completely. In addition, you can also register your phone number on the National Do Not Call Registry (www.donotcall.gov).

Update: How to Evaluate an Investment Property

noreply@blogger.com (HouseWealthy.com) — Wed, 28 Mar 2007 05:26:00 +0000

Well .... I have submitted my offer for the investment rental property covered in the previous blog posts How to Evaluate an Investment Property I & II. I believe it was a competitive offer and will now wait to see what happens. It still seems like sellers are holding on to the the notion that they can get the astronomical prices of 2005.

In my particular situation, I believe the seller may be misguided by following facts:

1. In 2005, a similar building in the neighborhood sold in the $600ks.
2. In 2006, another building sold in the $800ks.

The problem with this is that the previous owners marketed the properties as condo conversion candidates. This was really big in the Washington DC area in 2005 and early 2006. Sellers more or less sold the pipe dream that you could buy a building for $750k, renovate, get the proper permits and licenses, and then resell each unit for $275k each. This may have been true in 2003 and 2004 when building were acquired at reasonable costs. But in 2005 and 2006, once you factored in the high acquisition costs, carrying costs, renovation costs, and the high probability that you will have a very HARD time getting approval for the condo conversion .... you are left with a bad investment.

Needless to say the two buildings that sold in the $600k and $800k respectively have not been converted to condos. I especially don't know how the owner of the building bought in the $800k range is keep up with their payments. They must have put a hefty amount down.

I acquired a small apt building in DC in 2004 with hopes of a condo conversion. After a month or so of analysis, I decided to sell it because I felt that the condo craze was getting out of hand. Fortunately my timing was good, because I was able to sell it 6 months later for about a $275k profit without doing any work. It was sold to someone that wanted to "condo convert". At the present time, the building has been renovated but I am not aware of any of the units selling. So don't be lured into believing that condo conversions are still the way to go.

So at this point I will wait and see what happens with my offer. One thing is for sure, I won't be increasing the price. Hmmmm ..... I wonder how many buyers are going through the same thing I am at this very moment??

How Much Did The Owner Pay?

noreply@blogger.com (HouseWealthy.com) — Mon, 26 Mar 2007 14:34:00 +0000

With spring upon us, there will be an increase real estate market activity. Sellers will definitely be selling ..... and hopefully buyers will be buying :). But what are the best strategies for getting the best deal out there. Well today, I am on the buyer's side ... sorry sellers ;).

One technique that I use when negotiating an offer price is to find out what the current owner paid for their property. The days of $100,000 appreciation per year are gone, so owners are now more willing to negotiate. But what if the owner paid $500,000 for that great property in 2006 and now is selling it for $525,000 and it is really worth $475,000? Chances are he or she will not have much if any negotiation room. If a buyer offers less than that .... lets say $500,000, he or she may be wasting their time. But what if the owner paid $115,000 for that property in 1997 and now is selling it for $500,000 and it has been on the market for 6 months? In this instance, an offer of $425,000 has a greater chance of going over because either way the owner will make a lot of money at closing.

Minus the owner having a huge 2nd mortgage, this technique can improve your chances of having better success in getting a great deal in this new buyer's market. The best places to find out how much the current owner paid is either through your realtor or through online county records.