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Wednesday, September 27. 2006
 Closing. If you've already been to the closing table, hearing the word may evoke feelings of accomplishment. If you're just starting out in the real-estate business, however, the mere word can trigger overwhelming feelings of dread and foreboding. If you want to become a success in real estate, closing is a rite of passage that you cannot and should not avoid.
Unless someone helps you walk through the process, attending a closing can make you feel like you're visiting a foreign country where nobody speaks your language and everybody knows what's going on but you. When traveling, you can alleviate these fears by reading a travel guide written by an insider whose experience skillfully guides you through your journey; for example, a Frommers guide. When attending a real estate closing, you can read The Complete Guide to Your Real Estate Closing by Sandy Gadow.
Don't hesitate to judge this book by its cover because the title describes exactly what you get. The book follows the closing process chronologically from beginning to end so you can visualize each step of the process and understand why each step must take place in the order it occurs. The author ingeniously titles each chapter with a question that the buyer/seller/investor may ask at that point in the process. Gadow then provides the answers to these questions clearly, concisely, and in layman's terms without adding fluff or irrelevant narration.
The first chapter alone is extremely helpful -- a complete overview of the closing process from beginning to end. In one simple chapter, Gadow answers all the questions about who does what and when. If you need a visual representation that shows when events take place, the end of the chapter includes an actual timetable for a typical closing. The timetable helps alleviate anxiety associated with a closing by putting the timing of events into a cohesive perspective.
If you want further proof of the author's expertise, flip to the sections in each chapter called "A Typical Misunderstanding" and "The Way Things Really Are." In my opinion, it takes an insider to know which aspects of a process often are misinterpreted and how to clarify them for readers. These sections in conjunction with the "Tips" sections leave little doubt about the author's experience in real-estate transactions.
Although The Complete Guide is not presented as a handbook, you can use it as a practical guide. The book is an incredibly user-friendly reference tool complete with checklists and forms. The tables, appendices, glossary, and index are relevant, helpful, and easy to use.
Gadow's book is the best tool I've seen that covers the subject of closing. After you read it, the practical knowledge you have gained may eliminate the dread you once felt and allow you to approach a closing with the sense that you not only speak the language but that you've been there before.
Wednesday, September 13. 2006
There are a host of web-based real estate tools out there for anyone looking to acquire, revalue, or manage their properties. What I see out there is that because of the last few years being dominated by moving of single family homes, almost all of these tools are geared for the buyers with that intention.
However, there has to have been some thought put into these online services that allows for them to be easily used by those of us who are in the business of finding, acquiring, and reassessing rental housing. What about us? Hm.
Trulia.
The apparent point of Trulia is to become a more user-friendly version of an average MLS database, free for buyers. Just as with Zillow, you can hit the “advanced search� where after you specify State, all sorts of pick menus blink up. You can go by county, city, or school district ( NO zip code). If you pick a particular city that is supported by Trulia’s database, a list of neighborhoods pops up for inclusion into the search! And then you can further break it down by price range, square footage, and fifteen varieties of “Property type�.
I chose a neighborhood that I own property in, curious to see what was available for sale nearby. While I'm not currently "in" in the market, it's always good to keep tabs. Besides, if there are some nearby deals out there, I just might bite.
The pros:
The interface is pretty slick, with all the presented information on one page: pricing, rooms, footage, map, a photo, links to source website, etc. Then there’s the “Property Indicators� which tell you how the price per sq ft of a property compares to others in the same area, which is great. Furthermore, there are “Market Indicators� listed, which intend to display general market data, along with census and school district overviews for the general area you’re looking in.
The cons:
Unfortunately, the “advanced search� won’t allow you to do so within a particular zip code (you can search by zc off the main search, but not in advanced). It simply isn’t an option, and this is rather obnoxious if you know your markets are mainly divided along zip code lines. They don’t have near the number of properties in their system as I KNOW are available in the area. In fact, it only produced one property, when I know there are three other properties currently for sale on that same street. So, the inventory is rather lacking when compared to the joe-shmoe local MLS route, which is strange considering the stuffing of this data is supposed to come from web scraping. Also, there is not indication of contract interest, so I’m not sure if any of these properties are in the final throes of a soon-to-end bidding war. Additionally, there is no indication of lot size, which is an EXTREMELY important piece of information for any property buyer. And finally, the “similar homes for sale� section is stacked with comparably priced single-family homes when I’m looking at multi-unit dwellings, and that isn’t very helpful.
It will be interesting to see whether or not services such as Trulia bump out the traditional MLS groups.
Tuesday, September 12. 2006
There are a host of web-based real estate tools out there for anyone looking to acquire, revalue, or manage their properties. What I see out there is that because of the last few years being dominated by moving of single family homes, almost all of these tools are geared for the buyers with that intention.
However, there has to have been some thought put into these online services that allows for them to be easily used by those of us who are in the business of finding, acquiring, and reassessing rental housing. What about us? Hm.
Zillow.
The point of Zillow is to help you value property you already own, or value property you’re looking into. According to the site, their pricing matrix is based on County/Municipal data, which in most areas the taxed values do not coincide with actual market pricing, but they augment that information with “zillions of [other] data points�.
Whatever that means.
Curious to rate the results, I ran some of my own properties through the system and was rather impressed. It recognized which properties were multi and which were single family, along with some other pertinent details. And except for the properties which I know are oddballs (weird shaped lots, deep speculation plots), the valuations were reasonable. For research purposes: through the “advanced search� you can choose “multi-family� by zip code and then sort by “Home Type�. If you’re looking to help value a potential purchase, or if you’re dubious about an offer, this is a decent resource for ballparking some figures.
Side notes: Back in early 2006, Zillow wasn’t yet up to snuff, as evidenced by The Rage Diaries, where one can see an example of being “zillowed� by the software. You’ll also notice that their mapping interface is a mashup, which is pretty cool. And on their own blog, they break-down the creation of a custom property “Zestimate�.
Monday, July 10. 2006
It’s something of a tired subject, but duplexes are pretty hot on the market these days. Sure, they usually sell for less than comparably sized single family homes, but that’s because they’re priced primarily on cash-flow expectations rather than speculative demand or emotional first-time buyers.
So they aren’t that attractive for speculative buyers who want to see huge increases in the paper value of the property. Those who buy and sell, or “flip�, over very brief periods of time are not usually interested in buying used duplexes unless there’s something special about the property (like, super ridiculous crazy cheap, or a natural disaster like Katrina leaves your surviving duplex in goldmine status, which is the strangest blessing ever). Something particularly sellable.
Landlords want a property to become profitable as soon as possible, and then wind it up and let it go (hoping that maintenance and repair issues keep at a minimum).
Well, if owning multi-unit properties is such a long-view project that involves patience and planning, why are they so popular right now?
Apparently, l ots of families or friends are joining finances to purchase duplexes instead of individual homes. Other than that, it's hard to say why everyone's diving into the Landlord Game.
Not everyone is always so excited about Duplex livin’… But it’s better than renting someone else’s apartment any day.
Wednesday, June 7. 2006
Before you commit to any type of new relationship, you often can spot “flags” that help determine whether it’s a good idea to get involved. No one wants to spend a lot of time and money on something that drains their resources and offers little in return. This is especially true with investment properties, which have their own set of flags you can detect.
When I visit a property for the first time, I think of my encounter as the first-impression phase of a relationship, and look for potential flags. Afterwards, I have a pretty good idea about whether I want to proceed with getting to know the property better. Although you should consider a number of in-depth issues when buying an investment property, first impressions are still extremely important. Unless you plan to live on the property, you are entering into a type of love triangle with the property and potential tenants. No matter how much you love the asking price, financial figures shouldn’t be your primary consideration until you’ve determined that the property can be loved through the eyes of a future tenant as well as through your own.
Imagine a visit to a property for sale. The asking price is in your ballpark, your funding is lined up, and you are dying to make your first/next addition to your real estate portfolio.
Whatever you do, resist the temptation to buy based on sheer opportunity. An investment property isn’t simply an investment of money, it’s also a long-term relationship and a substantial money/time/energy commitment. Don’t make this decision hastily.
You can use the FLAGS memory device to decide when to look more closely at a property and when to walk away. This tool is solely for an initial assessment and is in no way an all-inclusive method for choosing a property. However, I’ve found it helpful in determining which properties have potential and which ones could turn into the proverbial money pit. When the urge strikes you to impulse buy, take a deep breath, remind yourself that there are plenty of other fish in the sea, and focus on these FLAGS:
F= Foundation
L= Location
A= Appeal
G= Garaging
S= Safety
Foundation
A property’s foundation is extremely important because it is a clue to the overall soundness of the structure. Whether the structure sits on pier and beam or on a slab, you need to be aware of the condition of the foundation. Check the property carefully for these typical flaws:
- Obvious cracks in the foundation
- Uneven flooring
- Cracks in walls
- Additions that have settled and shifted
If any of these flaws are present, consider consulting a professional engineer or appraiser before becoming attached to the deal. Correcting a foundation problem can be a costly endeavor.
Location
“Location, Location, location!” Just because we’ve all heard this rule of thumb a million times, that doesn’t mean it’s not true. When assessing whether a property is in a desirable area, keep the following list in mind:
- Access to public transportation
- Good neighborhood (low crime)
- Minimal new development
- Access to major highways
- Proximity to target tenants
- Access to shopping/businesses
If you are not familiar with an area, consider consulting a realtor or an appraiser who can show you the growth trends in a particular location or city. If the property does not allow easy access to important roadways, it may be seen as a disadvantaged property. Also, a lot of new construction in an area may cause potential tenants to be lured away from your property by newly available options.
Appeal
While appeal can be considered subjective, several factors can increase your likelihood of keeping a property leased. Check properties for the following aspects:
- Curb appeal
- Number/size of bedrooms and bathrooms per unit
- Updated rooms
- Neutral colors
- Easily maintained yard/interior
- Natural light
- Privacy
It’s not necessary for you to want to live in the property yourself, but you should choose something that will appeal to your target tenants. If you are planning to cater to college students, consider different amenities than you would if you are planning to lease to professionals, young couples, or families. Keep your target tenants in mind and try to see the property through their eyes.
Garaging
“Garaging” refers to the tenants’ needs for vehicle accommodations. Investors often focus too closely on a property’s structure and not enough on the tangential details of tenancy. The need for vehicle accommodation can be regional -- in many neighborhoods, pedestrian tenants abound and parking is not essential. However, in general, it is a good idea to determine the following garaging elements:
- Available parking options (off-road, carport, garage)
- Protection from elements
- Number of spaces available (especially for multiple-family properties)
- Width of driveway (if catering to multiple tenants)
- Bicycle storage
Again, picture the type of tenants you want to target and identify their needs. Limited or inconvenient parking can make any property undesirable no matter how many other amenities it may have.
Security/Safety
Unless tenants are desperate, they seldom stay in places where they do not feel safe. Some safety issues can be resolved by finding a good location. However, the property itself should also possess a feeling of security and safety. Check whether the following safety items are present or can be easily installed:
- Solid external doors with locks/ deadbolts
- Windows (secure but not painted shut)
- Shrubs (not blocking visibility of windows and doors)
- Visibility/privacy (tenant bedrooms/bathrooms not visible from street)
- Fences/play areas for children (structurally safe and integrally sound)
- Compliance with city ordinances (fire alarms, electrical/plumbing codes, fire escapes)
- Security for garages and storage areas
These details not only make your tenants feel comfortable enough to move in, they increase the possibility that your tenants will renew their lease at a future date. Additionally, safety compliance can reduce your liability if problems occur.
If your prospective property passes all the above FLAGS, you can safely move into a deeper, more meaningful relationship. The next phase of the commitment is to review seller disclosures and order a full inspection of the property by a professional. Just as in interpersonal relationships, cosmetic touch-ups may be hiding deeper issues that are overlooked by the untrained eye. With careful observation and a little luck, you will be well on your way to a long, prosperous relationship with a property that is worthy of your love.
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