Flip or Flop?

Flip or Flop?

            As the Real Estate market continues on its upward trend, many interested investors are looking at the “Home Flipping” mold of Real Estate investment.  As prices rise and inventory levels for Bank Owned homes rise with them, the opportunities for a fast and healthy ROI are certainly existent in today’s market.   However, low prices on large homes don’t always lead to great returns.  If interested in flipping a few factors must always come into play to protect yourself and your investment.

Comp it out!

            A high grossing flip simply is not possible without high sales price comparable homes in the exact vicinity.  Be sure to properly “comp out” your neighboring homes.  Regardless of how much money you pour into a home flip, it’s unlikely it will sell for much more then the highest previous sales in the area.  Be sure to properly factor a realistic sales price for the specific home before you even start a renovation budget.  Your budget must be set based on comparable sales, not on what’s needed in the home you have your flipping eyes on.

Reputable… Contractor – find one!

            While all investors worth their salt will properly budget out rehab costs, no budget is safe without a reputable contractor on your side.  Be sure that you have a strong understanding of build costs, what will be done to the house, and how long it should take.  Jumping the gun without a true idea of fair pricing and timelines can and will put you upside down before you can say underwater.  Hold costs are a large and important factor in any flip.  Working with a contractor who will “get to it when he gets to it” will put stress on your budget and your mind.  Be sure to find a reputable source that understands your strategy, budget and timeline.

Death and… Closing Costs

            Two things are certain some say.. Closing costs are a part of all and any Real Estate transaction and can simply not be ignored.  As these costs can range as high as 8-9% we need to be certain that these upcoming charges are factored into all decisions made prior and during the flipping process.  A 10% return in 60 days is great, until you pay 9% of it to the closing of the transaction.  If uncertain how to obtain a strong estimate of true net dollar on the future sale, request a pre-HUD based on estimated values prior to writing that check.  Be certain the estimates are obtainable; and most of all realistic. 

            While Real Estate flipping can be fun, it’s also a very dangerous and risky investment and certainly not for the faint of heart.  Whether you go into it alone, or with a certified team, be sure to always prep before you buy.  The Due Diligence now can save tens of thousands in the future.   For additional info on Real Estate investing and flipping, please visit www.SFLAInvestments.com.

With rates on the rise, it’s time to grab that prize!

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With rates on the rise, it’s time to grab that prize!

            As rates continue to rise many buyers and sellers alike are trying to decipher how the market will react.  As the old saying goes, history repeats itself, and it likely will once again.  As mortgage rates have a direct effect on buyers’ purchasing power, there really isn’t any surprise that rising rates generally lead to declining house values.  So how do we react, how do we plan and strategize accordingly as buyers or sellers of Real Estate in today’s current market?  The best and most effective plan of action is to prepare to move swiftly on either a buy or sell side.  Time as they say is money, and even more so when rates are on the rise. 

I wish I could sell before values fell

            Timing of the Real Estate market, or any market for that matter, is simply futile.  We as consumers do not hold much if any power in terms of controlling rates and/or their effect on the market.  Many buyers and sellers do however, try to time the market with the intent to buy or sell at “just the right time”.  This strategy often proves negative, as the thoughts of holding on for just the right time will often lead to less then stellar results.  As we hold no control over future changes, we must move forward with a purchase or sales plan that favors us as much as possible in the time that we are currently in.  If you are planning on selling or purchasing, don’t wait until the time is right, as no one really knows when that time will come, if ever.  Instead, decipher what is happening now, in today’s environment and move according to today’s conditions, not what you hope they will be in the near future.

Maybe we should wait to get a better rate

            As a buyer your mortgage rate will have a crucial effect on your purchase power.  It’s not a secret that better credit leads to lower rates and lower rates lead to more spending power, however waiting for that “perfect rate” can and probably will take you out of the market.  By sitting on the sidelines buyers simply lose opportunities that may have been perfect for them.  Sideline viewing is great at sporting events, but if you are in the market for a new home you must be on the field at all times.  The popular quote of  “work with what you have” is a perfect slogan for buyers in today’s market.  If your rate is now higher then anticipated, prepare accordingly with understanding that it affects the entire market at the same time it is affecting you.  So instead of waiting for rates to drop, jump in with both feet and negotiate that perfect home with the insight that rates are rising, not just for you, but for all potential home buyers. 

Lock and load before you hit the road

            “Locking in” a rate is a service that many mortgage providers can and will offer which in this environment can be an advantage for you.  All buyers should be pre-approved before they enter any homes for sale, but an extra step you may want to take is to lock in an attractive rate before they rise again if your lender allows.  Doing so will allow you to move forward with a full understanding of where your loan amount sits and how the rate will affect your purchase power.  Having these key points fully understood and in hand will allow for a streamlined negotiation with no big surprises at closing.  If in the process of purchasing, be sure to ask your lender about a rate lock.

The market moves in ebbs and flows, movements that we can easily track but which are close to impossible to forecast.  If selling or buying, do so in the present – take future calculations or forecasts out of the equation and buy or sell in today’s market – not tomorrow’s

Protecting yourself as a Buyer today

            I’m sure by now many of you are aware of the “heating up” of our local Real Estate market.  Buyers are active, home prices are climbing, cash investors are purchasing, rates are low – what a perfect concoction for another bubble!  While we can’t do much of anything to control the market, what we can do is prepare, and when the market starts to heat up again as it is now, there is much that’s worth more to a buyer then true preparation, strategy and knowledge.  Without searching and purchasing with a specific plan of action in place you may find yourself stuck in an underwater home; as we know – history tends to repeat itself.  If in the market for purchase, be sure to take some points into consideration.

Know your limit!

            Before even searching for a home on-line or with an agent, it is imperative that you are 100% aware of your true purchase power.  Many buyers simply get a pre-approval letter from a lender and hit the road.  Unfortunately these pre-approvals are often insufficient and simply not valid for each and every scenario.  Factors will arise that can and will quickly affect your true purchase power.  HOA fee’s, insurance, taxes, assessments, etc., these are all current and realistic components which can have a large effect on your true dollar limit.  Be sure to work diligently with your loan officer and/or Realtor® to fully understand not only your credit and income based approved loan amount, but also all of the factors mentioned and how they will affect your bottom line.  You don’t want to place offers on homes unless you are positive the home is within your true spending limit after taking all factors into consideration.

Dare to compare

            Comparables or “comps” are a large driving factor of the Real Estate market, without them we’d simply be shrugging our shoulders and guessing values.  As pertinent information is so readily available on-line and through your Real Estate agent, it’s simply prudent to use all information at hand to get an idea of what True Fair Market value actually is for any home you have interest in.  We all know what it’s like to fall in love with a home, but if you over pay the love quickly turns to disdain.  Protect yourself and your stress level by properly “comping out” any and all homes you have interest in prior to final negotiations on any home.  Moving to quickly based on emotion while ignoring data, facts and trends will simply place you on the wrong side of this slippery slope.  Protect yourself by having your agent fully educate you on current values and be sure not to overpay.  You’ll be doing the future you a huge favor.

Be on the phone regarding your loan

            Due to rapid appreciation, past bubble and banks precautions in the lending field many loans are being denied at the last minute as of late.  If a deal falls apart in the first few weeks, it can be heartbreaking – but to fall apart a few days before or on the actual day of closing can be life changing.  I’ve seen moving trucks packed, rental units cleared out and buyers and sellers at a closing table followed by a dead deal.  If financing your purchase it is vital to consistently stay on top of your lender, or mortgage rep regarding your loan and it’s process.  Ask for and demand commitment letters, appraisal clearance, underwriting acceptance, etc.  These are issues you want remedied before you pack.  With escrow at risk and inspection and appraisal fee’s that could go to waste, it’s simply good business to stay abreast of this situation, if you can’t stay on it be sure your agent does.

Keeping these factors in mind can and will save you time, aggravation and most importantly – money.  For additional tips please feel free to reach out to me at rick@rickrapp.com or visit the TMR office at 5923 W. Hillsboro Blvd, Parkland FL.

Marketing your home to today’s’ customer

Pic Me! Pic Me!

            With the presence of the internet and the ability for buyers to view your home on-line prior to stepping on your front lawn, high quality pictures are of the utmost importance when promoting your homes sale.  Unfortunately I often come across listings with sub par photos that look like they’ve been taken on an iPhone, or are simply too pixilated or small to show a buyer any semblance of the home.   When a buyer comes across a listing with insufficient pictures they will likely ignore the home and simply click on to the next, quickly depleting your buyer base.  If you are getting ready to sell or are already on the market, be sure that your agent uses professional photos that truly show your home in its best light, not doing so simply takes you out of the game.

Video killed the radio star..

            A very popular way to showcase your home is with the use of video technology.  With today’s available computer software and editing programs, agents worth their salt will produce a video of your home – sometimes referred to as a Virtual Tour or as I like to call it, a Video brochure.  Video can be extremely powerful when combined with music and additional information on the home.  With the additional use of You Tube, Vimeo and other digital video websites, the exposure to your homes sale is greatly expanded when going this route.  Making an easy and efficient way for buyers to view your home as well as offering an effortless way for them to share with loved ones, family and friends.  If a picture is worth a thousand words, what would you imagine a personalized video of your home is worth?  If you want an edge over your competition, have your agent channel their inner Spielberg and show that home off to the world!

School Me!

            Buyers in today’s market are extremely savvy.  If not on their own accord, simply due to the fact that there is an abundance of information available to them at the touch of a “Siri” button.  Buyers crave info, and they want it NOW!  All too often I come across listings that offer little to no pertinent information on the home for sale.  “Great home, seller motivated” is not going to generate much attention, and will probably be a hindrance as buyers and agents with less time on their hands then ever before don’t want to “seek out” more info.   It is your agents job to inform the public as well as Realtors in the area as to what exactly your home offers.  Not giving this information up front or in a clear and consistent manner simply puts you at the back of the line, waiting to be seen and wondering why the phone isn’t ringing.  Take the time to inform all possible prospects by having your agent fully describe your home in a clear and honest way. 

            Taking these three steps into consideration will help you attract true buyers interested in what you are offering.  Without doing so, each and every buyer that comes through your door can be considered a “tire kicker”, they are trying to learn because they haven’t been told.  Educate them ahead of time to the best of your or your agents’ ability and you can expect fewer showings, and more offers!

Is there another bubble amongst us?

            Word is spreading, the market is hot hot hot!  While this is exciting info, and hopefully gets our economy back on track, we must also be wary of the effects this foreseeable bubble can and may cause.  It hasn’t been long since the last burst, but we as American’s are soon to forget and unfortunately often let history repeat itself.  Whether buying or selling in this market, there are many factors to be aware of in order to protect yourself properly.

Sellers - Don’t Aim to high – you may miss your target

            An immediate reaction in a hot sellers market for many is to expect an exorbitant purchase price.  I often refer to the stock market while talking Real Estate pricing based on market conditions, and there really isn’t a better analogy.  When the market is hot; sellers who “play” the market often put themselves in more jeopardy then a seller who “listens” to the market.  All of us, each and every homeowner, feels there home is special and in turn, worth more.  By pricing too high however you can quickly and easily price yourself out of the market, putting yourself at risk for missing the high tide of the ebb and flow of our market.  You’ve heard the term “strike when the iron’s hot”, by waiting for it to get hotter you may end up burning yourself in the long run.  Timing of markets is difficulty, if not impossible.  Listen to and trust your agent when it comes to fair market value and price accordingly.

Buyers - This isn’t golf – don’t try to go low

            Buyers in this market are often frustrated and confused; with countless denied offers and/or lost properties many feel they are never going to find a home.  What many don’t realize however is that they may be strategizing their offers on a buyers market.  Often low balling homes and then finding themselves frustrated at themselves or their agent based on the inability to close.   The best strategy I can give a buyer in a sellers market is to be realistic and at times overly aggressive.  With lower inventory comes multiple offers.  If we plan on obtaining our desired home we must realize the conditions of the market we are in and act accordingly.  Offers must be appealing to sellers as they often have many to review.  This is not the time to lowball, it’s the time to react.  When you find the home you desire, have your agent run the comps in the area, factor what the market is doing and offer a fair and reasonable price for the market we are in.  Do this with an educated mind and/or agent, and you will come out on top.

            Rising prices in any market bring both angst and exuberance; you want to make sure you are on the latter side of that fence. By educating yourself and working with a professional who understands your needs as well as market conditions will ensure that you are the exuberant buyer or seller, rather then the person with angst.  Due diligence, patience and guidance will get you to the finish line with a smile.  Patience is a virtue and persistence pays!  Keep this in mind at all times and you will be sure to come out on top.

Should I Stay or Should I Go?

Should I Stay or Should I Go?

                  Surprise, Surprise, the market is on the rise!  As inventory levels have been depleted, home prices have started to climb at what many would call an alarming rate.  With increases as high as 14% in some areas, sellers are astounded by the offers they are getting, often well above list price and in many cases with cash.  This has raised again the #1 question homeowners have in a sellers market… “Should I stay or should I go?”

                  While prices are in fact up, and “cashing out” when the market is hot is easy to justify, all owners must consider their next anticipated step prior to making any decision to list and sell.  A healthy return on investment makes anyone smile, but if you are simply transferring that return into another property priced in accordance with seller market conditions, you could quickly put yourself in a worse situation then where you started.  By sure to plan your finances long term, don’t only focus on the return you’ll see on the sale of your current home, but be sure to also forecast future returns on your next.  If selling to purchase in the same area, we generally refer to this as a lateral move – it can be attractive, but if the dollars don’t add up, don’t make the move.

                  If you’ve been holding out for the rebound however, there has not been a better time to place your home on the market.  With lower then anticipated inventory levels, and a shortage of true move in ready homes – buyers are anxious to act and have their checkbooks ready.  Shall you do decide now is the time, be sure your agent properly analyzes the current market you are in.  Closed sales are extremely important as they always have been, but be sure to look at appreciation in the past six months, with prices rising, strategy changes – make sure your agent has a strong understanding of what’s happening in your area and can properly price your home for true top dollar.

                  As many homeowners in this market experience multiple offers it is prudent to prepare yourself for this ahead of time.  There are multiple factors to consider while reviewing offers.  Mortgage type, down payment placed, percentage of loan amount vs. purchase price and many more.   A higher price with a lower chance of loan acceptance looks nice on paper, but the loss of a buyer that can close can and will quickly evaporate any additional funds you may achieve by going with a higher priced, low chance of closing offer.  By sure you and/or your agent know the flags to look for as offers come in.

                  We are definitely in a sellers market, and prices are rising like a high tide.  This can cause anxiety to sell, and if you are ready now is definitely the time.  Just be sure that you understand all factors in the current market to assure a successful and profitable sale. 

Higher education leads to Higher Pay

Higher education leads to Higher Pay

            We’ve all heard it before, the more educated you are, the more likely you are to achieve a higher net income.  How can we use this simple strategy to achieve higher net amounts on our home sale?  By educating our buyers!  A more educated buyer is simply more likely to pay more for a home then an uneducated buyer.  By “teaching” our prospective buyers about our properties and locations we can acquire a higher purchase price with the right buyer.  But what do we teach exactly?

Advantages

            Each home has it’s own advantages and disadvantages, it is your Realtors job to educate buyers of interest what your homes advantages over other current inventory are.  Without knowledge of what your property offers, how can we expect a buyer to truly pay top dollar?  Buyers inherently want to pay as little as possible for whatever they are interested in purchasing, by “teaching” them why we are priced and what they are in fact purchasing, we can and will obtain our maximum purchase amount.

Upgrades

            Some upgrades are transparent, a new kitchen stands out, buyers can see and feel the obvious upgrade.  Many home improvements can be secluded however and unseen to a prospect unless pointed out.  These are the types of upgrades that we must point out to all interested parties.  A new A/C system, water heater or pool systems are high-ticket items, which can easily be over looked if not pointed out.  Be sure your agent is a true professional and has gained “tenure” with the knowledge of your individual property and all it offers.  It is imperative that your buyers have an understanding of ALL your home offers.

Location

            Working with an agent with a full understanding of your locale and all it offers can and may be your ticket to a higher purchase price.  Buying a home has a lot to do with what the community offers, and not being able to quickly educate your prospects on all your area offers can easily put you at the bottom of their list of interest.  By informing your prospective buyer on your community and how it will make their lives more enjoyable, it will be hard for them to forget and often times will result in a strong offer with the right buyer.

            Educating buyers is not a new trend in any way shape or form.  If you visit a car dealer, Apple store or even a Home Depot, you’re going to be informed on the product you have interest in - it’s sales 101.  This simple strategy, while often overlooked in the home sales market, is imperative to a successful sale.  Be sure your listing agent understands the importance of educating buyers as well as has a clear understanding of what the “lesson plan” is.   Educate and prosper!