Posts Tagged ‘Property’

Common Down Payment Errors Real Estate Investors Commit

May 13, 2008

If you are planning to invest in a real estate property, making a payment up front is one of the most important and most critical steps in the mortgage procedure. The amount that you pay as down payment is a key determining factor on the amount of monthly payments that you will make which makes the decision of what amount to pay up-front affect you for the remaining period for which you will be paying off the balance of the entire amount of the investment property.

In order to avoid the complications that may arise in the future because of committing these down payment errors, here are some guidelines that will help an investor avoid making these errors themselves.

Making A Very Small Down Payment

Mortgages with very low down payments offered by many lenders nowadays may be attractive to a lot of investors. However, even if these lenders require less than 20% of the property’s selling price, the loans also require the investor to pay a private mortgage insurance which is an extra fee apart from the monthly payment that you will be paying for the balance. The purpose of this private mortgage insurance is to protect the lender in case you default payment on the loan.

Low or no down payment loans also carry higher rates of interest which can only result to more costs in the long run. On the other hand, a higher down payment will earn you a better interest rate if you have a less than stellar credit standing.

Making A Very Large Down Payment

The notion that the greater amount you pay for your down payment, the better off you will be is not always applicable when dealing with real estate investing. Sometimes, real estate investors, especially first time buyers, use a big portion of their savings in order to pay the down payment at their advantage only to find out in the end that they lack enough money to cover closing expenses related to their new home.

Not Making A Down Payment

Not making any down payment can be a very risky decision. If you do not pay a down payment for the property that you are planning to buy, it will put you in a position of having no equity of the property which means you do not own any part of it. Once the value of the property falls, you will end up owing more to your lender than what the house is worth. This would also make it more difficult for you to refinance your mortgage in the near future.

Incorrect Assessment Of Your Debt Comfort Level

Nobody knows better than you how much debt you can hold. If you think paying more at the start will give you more benefits, then do not let anybody talk you out on doing so. Just remember that the worst thing you can do is to lock yourself into a mortgage that will only cost you more each month that the amount that you are comfortable to spend.


Why Activity Is Picking Up In Florida’s Property Auction Markets

May 2, 2008

In a depressed housing market, which is still reeling from the devastating mortgage meltdown, a lot of investors and brokers view auctions as a vital portfolio management tool, and like any other tool, it works wonders when used correctly for the right task.

The one thing all auction sellers in Florida, and probably elsewhere have in common is a desire or the need to sell within a shorter time frame than ordinary marketing methods or techniques would usually take.

Why The Auction Markets Are Good For Selling Homes These Days

Because of the slow activity in the housing market, here are among the most common reasons we hear about the perks of undertaking an auction. First, many view that these activities free up cash for alternative opportunities, and also eliminate “carrying” costs like interest, maintenance, utilities and taxes on property that is selling more slowly than anticipated in a business plan. Second, auctions enable home sellers and brokers to draw more attention to the property and set it apart in a crowded marketplace.

Third, auctions help cast a much wider net by drawing prospective buyers from a wider geographical area. And in addition, property auctions allow to establish the fair market value of a property that is difficult to appraise due to a lack of comparables. In reality, there are almost as many reasons as there are sellers. For those who are thinking of undertaking a property or home auction event, first ask yourselves, is the property suitable for an auction?

For instance, if you’re selling commercial land, the auction method is generally well-suited for locations near major cities, preferably with frontage on major roads and high visibility. For residential or commercial buildings, the auction method would most probably be best-suited to those that are high-quality, non-distressed, and in the growth market.

Auction Activity For The Condo Market

As most would expect in a tough residential condo market, auction activity is on the rise as developers and individual owners seek to quickly dispose of units that otherwise might sit idle and empty for longer periods. According to CEO of Pompano Beach-based Fisher Auction, inquiries have risen by 30% to 40% from a year or two ago, mostly from developers or bankruptcy courts.

While at this point, sellers have been end-users who bought on speculation, or were developers who needed their money back, the inquiries are now coming mostly from financial institutions. Most buyers are investors who are looking for deals and are not worried about staying in the market, while some auction buyers are individuals, but most activity is coming from domestic investor groups, and foreign buyers are also coming in to the auction market as well.

Activity Is Peaking In The Auction Markets Despite Some Problems

According to the chairman of Sheldon Good & Company in Chicago, one problem with condo sales at auction is depth of market, which he views greatly varies across the state of Florida. According to the housing market analyst, leverage is everybody’s enemy, as in some markets, prospective buyers worry about a further drop in pricing.

In other property markets where the oversupply isn’t as severe, buyers perceive less value from the auction, however, there’s plenty of business right now in the auction markets, notes the head of Sheldon Good & Co., as they are negotiating as well with other companies in the eastern and western sides of Florida, and the total amount of real estate under consideration exceeds $100 million.

Vanessa Arellano Doctor

Property-Tax Relief Plan No Cure For Home Sales

April 30, 2008

Proposed property tax relief could give a boost to South Florida’s beleaguered real estate industry, pushing skittish home buyers off the fence and easing the burden on commercial property owners, industry leaders said Tuesday.

But observers cautioned the housing market faces a multitude of challenges — the slowing economy, tight lending, skyrocketing foreclosures, too many unsold homes and high insurance rates — that must be resolved before the sector recovers.

‘The proposed tax cut would be a benefit because it would create some stabilization to property owners’ taxes,” said Michael Cannon, a real estate analyst. “But it’s no silver bullet.”

For some time, housing industry executives have cited excessive property taxes as a factor for the troubled residential market. High taxes, on top of expensive homes and burdensome insurance costs in South Florida, have priced some out of the market and stopped others from moving to the region. It’s also chilled in-state moves because buyers fear being assessed at a higher tax rate in a new home.

Ronald A. Shuffield, president of Esslinger Wooten Maxwell, a South Florida brokerage, said lower taxes might inspire some confidence in buyers. Rental activity at his firm has tripled, rising to the highest level he’s seen in three decades. He attributes it to buyers being cautious.

But that could change with the Taxation and Budget Reform Commission’s proposal to reduce tax bills by around 25 percent or more by scrapping most of the local property taxes that go to schools. The proposal, which will go to voters in November, would also cap annual property tax increases at 5 percent for investors, second home owners, commercial property owners and those ineligible for homestead status, which caps on property tax increases at 3 percent annually.

Vanessa Arellano Doctor