Three Ways to Increase Property Values

Real estate investors live and die by their ability to add value. With no added value, there are no profits. This is true with any business, but what makes real estate such a great business and a great investment, is the number of ways you can add value and cash in on big profits. Here are three ways you can add value to your properties.

Upgrades and Repairs: OK, this is the obvious one and is the reason fix and flippers can make money. Some repairs add a lot more value than it costs to do. The more creative you are with the improvements, the more value you can add. For example, I have a client that adds square footage to every house he buys. He really likes the inner city properties because they are the hardest to add square footage. You either need to finish an unfinished basement, or add a second story. There is not typically enough land on the lot to add an addition by increasing the foot print of the property. This client does a lot of basement finishes and “pop tops,” but where he has made the most money is the basement that is only 5 or 6 feet deep. He will go in and dig out the basement to a full 8 or 9 foot height and then finish it. Something most investors would not think of, so he is able to get the deal most other investors pass on. I have also seen some investors find houses that don’t really fit into a neighborhood and they make them fit. This could be limited bedrooms or bathrooms or funky floor plans. All of that can be changed. Obviously many cosmetic fixes like kitchens and bathrooms add a lot of value too. There is a lot more to it than this, but the idea is to buy a property at its true ‘as is’ value, (don’t over pay), and then add value with the repairs and upgrades.

Owner Finance: I love this one because it is so easy to add value with very little to no work. You will need to wait to cash in on your profits, but it is a way to increase a sell price significantly. You can also use this strategy to defer tax gains over a few years, instead of taking a big hit all in one year. When you have a property for sale there are a limited number of buyers for the house, although right now that pool of buyers seems pretty big. If you can increase the pool of buyers, the demand for that one house increases, which forces the price to go up. Someone that cannot qualify for an ordinary loan, limiting the supply of houses to choose from for that buyer, will likely buy your property. That also increases the price. You are adding value by giving them the chance to own a home that they normally would not be able to own. For this value, you should be compensated with a higher price and a decent interest rate on the profits, while you wait for the buyer to refinance and pay you off in full.

Shared Units: This is one area of real estate that I have not dabbled in, but it is extremely inviting. The idea here is to sell your property to multiple buyers. You are seeing this a lot in resort towns. It is always a vacation or second home. Have you ever been to a time share presentation? They are pretty enticing aren’t they? About 13 years ago my ex wife and I were in Florida and got sucked into a time share sales pitch. We decided to go because they offered us free tickets to Disney. We sat there for about an hour and a half and then the hard sale came. They were very good at selling the “idea” of the time share and had my ex wife sold. She asked me to move forward with the deal, but I could not bring myself to do it. I told her that I was not comfortable with an emotional purchase and that we needed time to think it through. “Can I please have our Disney tickets?” was my response. As we rode back to the hotel that afternoon, I started thinking about the math. Each unit can be sold to 52 different people because your purchase only gets you 1 week a year. Add that to the annual maintenance fees and the numbers are staggering. I know people who have flipped time shares successfully, because you can get them for free or near free on Craigslist, but it is not an investment I was interested in. With that said, I have considered doing a half or quarter share on a house in a ski town in Colorado. In this scenario, you are sharing a house with 1 to 3 other people so there is a ton more flexibility. You can use or rent out your weeks and you can be guaranteed valuable high demand weeks every year. It is a way to get a second home without the full expense. From the seller’s point of view, it is a way to get more for the house. ½ a share of a house is going to cost the buyer more than ½ of the fair market value. I have seen business plans from investors that would buy a house and quarter share it out. The idea was that after they improved the property and sold ¾ of the house to 3 different buyers, they would own the last ¼ free and clear. Obviously this strategy will work best in areas where people want second homes. The downside is if there are any improvements or major issues. I can see there being disagreements, so this is something you would want, as a buyer, to work out with all the other owners in writing before you buy.

REAL ESTATE: Something You Might Want to Know

Real estate means the property consisting of land or buildings which also includes the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water and minerals, simply speaking any improvements on it. Tenants and leaseholders may have the right to occupy or make use of anything that is within the dominion of the rented area depending on the terms and conditions set by the landlords.

However when we hear the words “real estate”, we often refer it to the “real estate market” from the perspective of residential living. This is grouped into three categories based on its use. It’s either be residential which is used for living purposes, commercial as used in commerce and industrial which is used in manufacture or production of goods. Residential are those undeveloped land, houses, condominiums and town homes. Commercial are office buildings, warehouses and retails store buildings and examples of industrial are factories, mines and farms.

Those who are buying a home often need to borrow money in the form of mortgage because prices are generally well above their savings. They can either avail of fixed-rate or variable-rate.

Commercial leases are mostly longer that residential and lenders may ask for higher down payment on a mortgage for commercial than home loan since generally residential real estate is usually less expensive so it is more affordable for small investor

Generally, this is affected by the primary condition to where the property is located. Profits or losses come through revenue from rent and appreciation of the estate’s value. There is also risk of tenant turnover especially if the business model is in bad condition, product is unattractive, or poor management and many more. So landlords, lessees has to make sure all is well set before lending the area/place.

Real estate can help you earn more especially if you are in hand with generating leads and setting well the properties in case you are into selling or offering rentals. You have to make sure you will be working more of what you invested. Usually property appraisals are of good and or high value, you just need to work on it. You must always and consistently putting your client’s best interests first. With that, your personal needs will be realized beyond your greatest expectations. Investing in this even on small scale, was tried and tested as true means of building an individual’s cash flow.

The 4 Benefits of Fix and Flip Loans

Buying a real estate property, repairing and selling it quickly tends to be a profitable recipe. However, a key component of this recipe to success is access to capital. If one does not have sufficient funds but is interested in rehabbing a property, a hard money lender who offers a fix and flip loans could be a great financing option. These loans are structured in such a way that allow a purchaser to quickly acquire the property and have access to a reserve of funds for construction and renovation costs.

Buying a real estate property, repairing and selling it quickly tends to be a profitable recipe.

Advantages of Fix and Flip Loans

There are many advantages to fix and flip loans and the demand for this source of funding is steadily increasing in the real estate investment industry.

Four key benefits include:

  • Quick Approval: Getting approved for a fix and flip loan is a far quicker process when compared against the traditional banking system. If the borrower has submitted the requested documents, a private lender can approve the loan within a couple of days whereas a traditional financial institution can take at least a month. In addition to the significant longer wait time for bank loan approvals, the borrower will be required to submit numerous documents and clear multiple conditions as part of the process.
  • Any Property: Properties in varying states of the condition can qualify for a fix and flip loans. Whether the property is bank owned, a short sale, a foreclosure, or in a dilapidated state, a borrower is still likely to find a hard money lender willing to fund the deal. Once again, a borrower may not have the option of funding these types of real estate opportunities with a bank. Banks are very risk averse and have strict rules in place as to what type of property they can accept as part of their loan portfolio.
  • Zero Prepayment Penalties: If you take out a loan from an established bank, you may be hit with penalties should you have the opportunity to pay the loan off before the maturation date. This is called a prepayment penalty. Most fix and flip lenders will not subject you to this fee.
  • Repairs Covered: When you buy a property with the intention to flip it, a significant portion of your budget will be spent on construction and renovation costs. A fix and flip lender will usually set up a loan reserve which will cover repair costs of the property in addition to interest. This can alleviate a lot of stress and pressure for builders and developers since they don’t have to worry about spending money out of pocket for repairs or payments.

Teaming up with a solid lender who understands your property, the local real estate market, and is willing to help you throughout the acquisition, construction and selling process is vital. When choosing a hard money lender, keep the following in mind:

  • The lender must have sufficient experience in the industry. A private lender that has deep roots in the real estate investment market will not only be able to offer you a better deal but will also have numerous contacts that will prove helpful along the way – from recommended settlement companies, to permit expediters and other preferred vendors. This can prove to be a great asset as speed, quality and efficiency is the name of the game in the fix and flip world. The less time you need to spend vetting companies and contractors is more money in your pocket.
  • Check the history of the lenders to ensure that they are genuine and have a good track record. It may be worth taking a closer look at lenders that tempt borrowers with “teaser rates” or a “no documents” underwriting process. As with most things in life, if it seems too good to be true – it usually is.
  • Finally, you should check out what previous or current customers have to say. Is the lender responsive and knowledgeable? How many loans do they have on the street? Do they have good ratings on Google or the BBB? Just as the lender performs due diligence on their borrowers, the borrowers should, in turn, conduct due diligence on the hard money lender. It’s a partnership and both parties need to be solid and committed to the process in order to ensure success.

Real Estate Fraud

This is an activity that is purposely done to misrepresent information on real estate documents. It also involves the money transfers. It is also called mortgage fraud. The reason that it is referred to as this is that the fraud generally takes place with the mortgage application. Real estate fraud, in the United States, can have heavy penalties like imprisonment and large fines.

Such a crime can be committed in many different ways. It appears to happen more often when property prices are on the rise. Because of the simplicity of the fraud, some types are seen more than other frauds. Some are not as common because they are more complicated. One of the common forms of such fraud, according to the IRS is preparing two settlement statement sets that are different from each other. In one of the statements, the accurate property-selling price is written, which the buyer receives. The other one will depict a higher selling price that is exaggerated. When the mortgage lender approves the loan for the exaggerated price, the seller is given the amount that is stated in their copy of the settlement statement. The one who committed the fraudulent settlement statements will keep the money that is left over. If there are other conspirators, the money will be divided among them. It could be the entire excess money or a percentage of it.

Using qualification that are fraudulent is another type of real estate fraud. These fraudulent qualifications are used when applying for a mortgage or home loan to help them get the mortgage. In this form of real estate fraud, the real estate agent will usually assist the buyer. The fraudulent qualifications can include fabricating credit reports or history of employment. These two involve the obvious misrepresentation of data but not all real estate fraud is easy to see as these two examples. If buyers who do not intend to commit real estate fraud because they do not know the laws can accidentally commit mortgage fraud.

If a buyer has a down payment by using money that was given as a gift it is legal. If this gift is re-paid to the who gave the gift, this is considered a case of real estate fraud. The gift used to make a down payment cannot be repaid for it to be legal. Another type of property fraud is when the buyer accidentally fails to disclose any financial liabilities on their mortgage application. It becomes fraud when it is not taken care of before the loan is approved. Property flipping can become real estate fraud if you make false representations about the value and condition of the property when you sell it for a much higher price than you paid for the property.

Altadena Real Estate – A Look at the Numbers

The real estate market in Altadena, CA is red hot. Homes for sale in Altadena command high prices and never stay on the market very long. Why? Both realtors and residents will answer that by stating: Altadena is a very special place to live, work and relax.

Altadena is charming community located directly north of Pasadena at the base of the Angeles National Forest San Gabriel Mountains. Altadena is an unincorporated and 14 miles northeast from Downtown Los Angeles. This warm, Mediterranean climate has hot and dry summers that average highs of 91 degrees. The winters are essentially warm and windy with the lowest average temperature of 44 degrees. Altadena averages 21 inches of rainfall annually.

According to the 2010 U.S. Census – Altadena had a population of 42,777 people. With 8.71 square miles to share there were 4,909.6 people per square mile. This is average for Los Angeles County. The population was more diverse compared to other areas of the county with the dominate ethnicity being White at 52.8%, followed by 26.9% Latino, 23.7% Black, 5.4% Asian and 0.7% American Indian.

The population of Altadena is well educated in comparison to the rest of the county with 45.6% of residents aged 25 and up with a four year degree and 87.9% with a high school diploma. In regards to the male population: 57.8% were married, 32.9% had never been married, 7.1% had been divorced and 2.1% were widowed. The female population had53.9% who were married, 24.4% had never been married, 12.4% were divorced and 9.4% were widowed. The average age of Altadena was 37, which is an older average age compared to the rest of Los Angeles County. 9.8% of the people in population were veterans and 20.8% of residents were born in a foreign country. The average commute to work was 27.5 minutes. Altadena has a Walk Score of 48 out of 100 meaning that it is a car dependent city.

The average household size was 2.8 people, which was 9% higher than the national average. Approximately 74.6% of residents owned their homes. This was 10% higher than the national average. 25.4% of the population rented from a house, apartment or condominium. The 2010 Census declared there being 15,518 households with a median household income of $83,917. This is high compared to Los Angeles County.

Altadena real estate isn’t cheap, however. The median price of homes for sale in Altadena is $780,000. This is 226% higher than the national average. However, the average home value is $731,400. The price per square foot is $485. The current housing market “temperature” is neutral. Last year the home values increased by 8.1% and Zillow predicts they will rise only 1.9% within the next year. The average monthly rent is $2,921. This is 53% higher than the national average. The current housing market health is 6.9/10. This is healthy score given by Zillow in comparison to other housing markets across the country.

According to Area Vibes, Altadena has a livability score of 77 – extremely livable. This is higher than the national average of 70. This comfortable, safe community will continue to flourish and grow and produce beautiful homes by its affluent residents. If looking to buy or sell real estate in Altadena, make certain you perform your due diligence and find an experienced realtor who specializes in the area.