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Avoid the $1,342 Per Month Retirement Plan: Power Teams

December 3, 2018 - 3:07pm

According to Money magazine, the average 2017 monthly Social Security payment in the U.S. was $1,342. This isn’t adequate to cover the expenses on a decent apartment in most metro areas, and certainly wouldn’t allow anyone to purchase nice clothes, fancy meals or go on any exciting vacations.

If you plan to rely only on Social Security for income in retirement, you might also plan to live in low-income housing and receive assistance for other basic necessities. As depressing as this is to ponder, it could very easily happen to many of us. Let’s break the cycle of the average American and start saving for our retirement today.

There’s more to the retirement story. The Economic Policy Institute estimates that the average working family in the U.S., aged 32 to 61 years old, has $95,776 in retirement savings. If the advice from retirement experts is accurate, the typical American family will have an additional $4,788 to spend each year in retirement. This would bring the average monthly retirement income up to a whopping $1,741.

Unfortunately, my discussions with many real estate agents and teams reveal that they aren’t very good savers. It may be because our income is inconsistent, which makes it feel like it’s always either feast or famine.

Real estate professionals, however, have a distinct advantage over the general population. We have the ability to find great real estate investment properties without having to go out of our way. Remember the last time you were out showing houses and found one that wouldn’t work for an owner-occupant, but you just knew it would make a great investment property? Why didn’t you buy it?

Many people are simply afraid of risk. Only 11 percent of U.S. adults own rental property, according to 2013 data from Landlord Station. Based on some informal surveying of mine, the percentage of my real estate pals who invest in rental property is even lower than 11 percent. We know how to tell a good house from a bad one, and we come across good deals all the time, so what’s the problem?

It could be because we don’t have money saved for a down payment, or we’re afraid we might not qualify for a mortgage. I believe, however, that the real root cause is that many of us don’t fully understand the long-term benefits of owning rental property.

I firmly believe that nearly everyone should own rental property as part of their retirement strategy. Below are five points you should keep in mind when considering investment properties:

Invest for cash flow only. Make sure you only purchase a property that’s cash flow positive.

Buy “average” properties. If the average home in your market is a three-bedroom, two-bathroom home with a two-car garage, this is the type of home you should buy. 

Know your total expected return. In addition to cash flow, rental properties pay the landlord in three other ways: principal reduction as you make your monthly payment; appreciation as the market pushes the price up; and the tax savings from depreciation.

Understand rehab and carrying costs. If upgrading the property is part of your strategy, you must fully understand the costs involved in rehabbing and carrying the property until it can be rented.

Prepare financially. Start saving some cash for the down payment and meet with a lender to discuss qualifying for financing.

My wife and I have been investing in rental properties since 1992, and we hope to fund a chunk of our lifestyle in retirement with income from these properties. We have two very important tools we use when analyzing properties: a cash flow analysis worksheet and a rehab worksheet. If you’d like a copy of these tools, email me at Cleve@GoGaddis.com.

If you decide to jump into the world of real estate investing, I hope you reach the height of real estate multimillionaire. Wouldn’t that make your retirement years more fun?

Cleve Gaddis is a master coach with Workman Success Systems and team leader with Gaddis Partners, RE/MAX Center in Atlanta. He learned sales the hard way, selling vacuum cleaners door-to-door, and now puts those skills to use in helping his team close $60 million annually. He loves to share his systems and strategies to help others succeed. He hosts the Call Cleve Atlanta Real Estate Show heard weekly on NewsTalk 1160 WCFO. Contact him at Cleve@GoGaddis.com. For more information, please visit www.workmansuccesssystems.com.  

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Categories: Real Estate

5 Spooky Things Clients Do to Real Estate Agents

October 30, 2018 - 1:54pm

It’s the season of scary and as a real estate agent, the spookiness often lasts all year long. Since it’s Halloween, we thought we’d get in the menacing mood. That’s right—we’re going to list five really spooky things clients (or people in general) do that surely give agents goosebumps. 

  1. The open house sign-in shut down
    A simple task, and, yet, many can’t take 10 seconds to do it: writing down an email when you arrive at the open house. Tip for agents: Put a freshly baked plate of cookies out with a little sign saying “one per email.” They won’t be able to resist.
  1. Refusing to sign electronically
    Your real estate agent—who works seven days a week, around the clock to find you your perfect home or get you more than the listing price—asks you to sign electronically. There’s a reason why they do this, and it’s not because it makes them feel warm and fuzzy inside. It’s fast and efficient, and as a plus, it’s eco-friendly. In the name of everything that’s good in this world, why would you demand to sign on paper? WHY?
  1. Buy a giant boat in the middle of escrow
    As a buyer, you have one job, and that job is to sit tight and let your agent find you the perfect home. When you find that home and you’re in escrow, it most certainly is not time to celebrate by buying a car, yacht, helicopter, or, even worse yet, another house. That would be what’s known as a fail—do not pass Go, do not collect $200 dollars.
  1. Request to look at homes outside their price point
    There’s a fine line between asking your agent to go above and beyond and downright taking advantage of them. If someone has been approved for $500,000-dollar homes, then that is the realm of homes they’ll be showing you. So, the answer is no, Barbara, you can’t look at the $10 million-dollar home.
  1. Work with multiple agents at once
    This one almost hurts to write. If you’re at the beginning of the process and just trying to figure out which agent you’d like to work with most, then this is totally acceptable. Shop around. If you’re anywhere further down the home-buying or -selling path, please refrain. It’s not fair to either party. Remember: Agents don’t get paid unless they transact.

Bonus spookiness: When clients insist on sticking around during the open house. Eek!

The good news, we have a way to really knock your client’s socks off, and it’s called MoxiPresent: interactive, stunning presentations for open houses, buyers, sellers, you name it. Find out more here.

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Categories: Real Estate

Getting Your Clients’ Homes Ready for the Fall

October 25, 2018 - 2:12pm

No matter when a homeowner lists their home, some principles of staging hold true. Overall, homes will benefit from having neutral interior wall colors, rather than vibrant or bold colors. Keeping the listing clean is always a must, as well as decluttering, and keeping it odor-free.

However, once these basic staging needs are taken care of, you can go a step further with your clients and help them add some seasonal personalization and maintenance to make their home stand out even more to prospective buyers.

When your clients see you as a partner who’s got their backs, they’ll trust you and refer others to you, as well. Seasonal content, such as this infographic on getting your home ready for fall, is a great way to build trust and keep in touch with your sphere. Find the infographic below, and if you want to take it a step further share through email this personalized Fall Checklist with your clients so you stay top-of-mind this season, click here to download!

Patty McNease is director of Marketing at Homes.com. For more information, please visit marketing.homes.com.

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Categories: Real Estate

4 Signs You’re Not Ready to Be a Homeowner—and What to Do About It

October 21, 2018 - 11:00am

(TNS)—Buying a home is a major life milestone, right up there with snagging a dream job or finding true love. Your heart might be set on becoming a homeowner, but red flags might indicate you’re not yet ready to make the leap.

For many, particularly millennials, homeownership represents much more than a financial investment. In a recent Homes.com survey on millennial attitudes toward home-buying, 74 percent of millennials equate homeownership with stability. Although it will likely take them longer to meet their goal, 68 percent of millennial respondents said they’re likely to buy a home at some point in the future, the survey found.

Whether it’s too much debt, a lack of savings or a roving lifestyle, there are several reasons why potential homeowners might want to delay a home purchase. Here are four of them—and advice on how to overcome these obstacles.

  1. You Have Too Much Debt
    To get approved for a mortgage, you must show you can handle all of the expenses of owning a home (including the ones that aren’t rolled into your monthly mortgage payments). You also have to meet your other financial obligations, and that might be a challenge if you already have a mountain of debt on your plate, says Jennifer Beeston, branch manager and vice president of Mortgage Lending with Guaranteed Rate.

“A lot of people approach buying a home in terms of what’s the max they can afford,” Beeston says. “With lenders’ guidelines getting looser, some will accept a debt-to-income ratio of up to 50 percent, but that’s based on your mortgage payment and debts that show up on your credit report in relation to gross income.”

Beeston adds that DTI calculations don’t take into account expenses such as schooling, daycare, income taxes, healthcare and retirement savings.

How to overcome it: Pay down your debt to a manageable level. If you’ve accumulated a lot of debt over time, consider a personal loan to consolidate them into one streamlined, and preferably lower-interest, monthly payment. And avoid getting sucked into a new debt trap by cutting spending and diligently paying down debt. A debt consolidation calculator can help you determine how to strategically consolidate and pay down your debt.

  1. Your Credit Isn’t Stellar
    Your credit history and credit score are closely linked to the mortgage pricing you’ll receive—and that impacts your monthly payments for the life of the loan, says Dan Green, CEO of Growella, a mortgage news and advice website. A good starting point is to give yourself a credit check-up to see where you stand.

“If your credit score is not optimal, you’ll pay more for a mortgage,” Green says. “Your credit score today will have a huge impact on the homes you’re looking at and can afford. It may be sensible to wait to buy and work on your credit.”

Let’s do a quick calculation for two borrowers applying for a 30-year, fixed-rate mortgage for $300,000 with 10 percent down. Jen has an excellent credit score and was offered a 4.75 percent interest rate, and Sarah, who has a lower score, was offered a 5 percent interest rate. Sarah’s monthly payments are roughly $41 more than Jen’s, but where she really gets dinged is in overall interest paid. She’ll pay nearly $15,000 more in interest of the loan’s lifetime because she didn’t get a lower interest rate.

How to overcome it: To boost your credit score, pay your credit cards and other debts on time. Ideally, credit cards should be paid off in full every month. Avoid opening new credit lines unless you’re establishing a credit history. Finally, keep your credit utilization ratio to 30 percent or less of your available credit limit for each credit account. In other words, your balances shouldn’t exceed 30 percent of your maximum credit limits.

If you’re emotionally and mentally ready to buy a home, there’s likely a home you can buy. The catch: you might have to settle for less than your ideal home if your credit and finances impact what you qualify for, Green points out.

  1. You Don’t Have Enough Savings
    Buying a house comes with a lot of upfront expenses that go beyond your monthly mortgage payment. Expect to pay 2 percent to 4 percent of a home’s purchase price in closing costs. Plus, there’s the down payment (anywhere from 3 percent to 20 percent of the purchase price, depending on your loan type) and moving expenses to factor in.

But it’s the hidden costs of homeownership that take many new homeowners by surprise. These might include homeowners association dues, condo/assessment fees, routine maintenance, utility bills and major repairs. Ideally, homeowners should save roughly 1 percent of the home’s purchase price each year for maintenance expenses, says Adam Smith, president of the Colorado Real Estate Finance Group.

Many people don’t have that kind of cash on hand. A recent Bankrate survey found that just 39 percent of Americans would pay for a $1,000 unexpected expense from savings.

How to overcome it: To save more, pay yourself first by depositing a set amount from each paycheck into a savings account. If you have to start small, that’s OK. Consider opening a high-yield savings account to accrue interest on your cash. Cut back on unnecessary spending such as monthly subscription services, eating out, impulse shopping and other financial vices. Depending on your income and credit profile, you may qualify for homebuyer assistance programs that can help you pay for down payment and closing costs for a home.

  1. You Want a Carefree Lifestyle
    If you’re someone who moves frequently, buying a home might not make financial or practical sense. Lifestyle plays a huge role in the decision to rent versus buy, Smith says. Remember that the bigger the house, the more maintenance and upkeep. If you want to keep things low-key, buying a condo or continuing to rent might make more sense until you’re ready for more responsibility.

Another thing to consider if you don’t tend to sit still: It might be a hassle to sell your home or rent it out eventually. Home values can go up or down over time so there are no guarantees that you’ll be able to sell.

How to overcome it: Take time to consider your lifestyle factors that impact your housing choices, including whether you plan to move around a lot, your ability keep up with and pay for ongoing maintenance, your commute and current or future family needs. And take care with buying a house with a partner if you don’t share similar financial and life goals, Beeston says.

“Don’t rush to buy a house because you’re reacting to a life event,” Beeston says. “Take your time. It’s a big purchase, and there’s no guarantee you’ll get what you paid—or more—for it.”

©2018 Bankrate.com
Distributed by Tribune Content Agency, LLC

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Categories: Real Estate

What Property Buyers Should Know About Land Loans

September 9, 2018 - 11:03am

(TNS)—If you’re thinking about buying land, you’ll be hard-pressed to persuade a mortgage lender to finance your purchase. Instead, you’ll likely need to apply for a land loan.

Land loans aren’t as common as mortgage loans, so your options may be limited. Also, because of different factors, you could end up with a shorter repayment period and higher down payment and interest rate than you’d find with a mortgage loan.

So, if you’re considering getting a land loan, it’s important to know what you’re getting yourself into and what options are available to reduce your costs.

What Are Land Loans?
Land loans are a type of credit you can use to buy a vacant lot to eventually build a home on or raw land that you don’t intend to develop.

Land loans tend to be riskier for lenders than mortgage loans, says Casey Fleming, a mortgage adviser with C2 Financial Corp. in San Jose, Calif. Because of that, you may not get as favorable terms as you might get with a mortgage loan.

“Owners of raw land are much more likely to stop making payments and walk away from the property in the event of a financial event in their lives,” Fleming says. “And land is much harder to sell (than a home).”

That’s primarily because the demand for land is smaller than the demand for new and existing homes. So, if a lender needs to foreclose on the land, there’s no guarantee it will get its money back in a timely manner, if at all.

As a result, some lenders require a substantial down payment and charge high interest rates on land loans. Also, some land loans have significantly shorter repayment terms than a typical 15- or 30-year term you might get with a mortgage loan.

5 Land Loans to Consider to Finance Your Land Purchase
There are five common types of land loans you can get to finance your land purchase, each with its own terms and features.

  1. Lender Land Loans
    Community banks and credit unions are more likely to offer land loans than large national banks. Your best bet is to find a lender with a presence near the land you want to buy. Local financial institutions know the area and can better assess the value of the land and its potential.

If you’re leaving the land undeveloped, interest costs will be very high, Fleming says. Plus, a lender could require a down payment as high as 50 percent.

Some lenders, however, may be willing to take a lower down payment and charge lower interest rates if you have plans to build on the land soon. So, shop around before you apply.

Also, local lenders are more likely to offer longer repayment terms, giving you more time to repay the debt.

  1. USDA Rural Housing Site Loans
    If you’re planning on building a primary residence in a rural area, the U.S. Department of Agriculture (USDA) has a couple of loans that can help.

Section 523 loans are designed for borrowers who plan to build their own home, while Section 524 loans allow you to hire a contractor to build the home for you. Both loans are designed for families with low to moderate income, and they have a repayment term of just two years. Interest rates, however, can be low. Section 523 loans, for instance, charge just 3 percent, while Section 524 loans charge the current market rate.

Depending on the situation, you may even qualify for a loan with no down payment.

  1. SBA 504 Loan
    If you’re a business owner planning to use the land for your business, you may qualify for a 504 loan through the U.S. Small Business Administration (SBA). With a 504 loan, you, the SBA and a lender help contribute to the costs of the land purchase:
  • The SBA provides a loan for 40 percent of the purchase cost.
  • A lender provides a loan for 50 percent of the purchase cost.
  • You contribute 10 percent in the form of a down payment.

SBA loans come with a 10- or 20-year repayment period, and the interest rate will be based on current market rates. The terms of the loan you receive through the lender can vary, however, depending on which lender you choose.

  1. Home Equity Loan
    If you have an existing home with significant equity, it may be worth getting a home equity loan instead of trying to get a land loan. There’s no down payment on a home equity loan. What’s more, you can typically get a low interest rate—regardless of what you plan to do with the land—because your home secures the loan.

The downside is that if you default on the loan, you could lose your home. Also, since you’re not using the loan to buy, build or substantially improve the home used as collateral, you can’t deduct the interest you pay when you file your taxes.

Depending on the lender and the loan, your repayment term could be anywhere between five and 30 years.

  1. Seller Financing
    In some cases, the person or company selling the land may be willing to offer short-term financing. In many cases, the seller isn’t in the lending business and doesn’t have a broad portfolio of loans like a community bank or credit union.

As a result, you can typically expect high interest rates and a high down payment. Also, it’s unlikely you’ll get a long repayment term. So, consider this option if you can’t qualify for any other type of land loan.

How to Find the Right Land Loan for You
There’s no single best land loan out there for everyone, so it’s important to shop around to find the best one for your situation. Before you do anything, Fleming recommends developing a comprehensive plan for what you plan to do with the land. Doing this can help you determine what type of loan is best and how long you want the repayment term to be.

Keep in mind, though, that some lenders may have limits on how much they’re willing to finance. Others, Fleming says, may require a balloon payment, which is a large, one-time payment at the end of the loan term. “So, you may have to have a plan to pay it off before that payment comes due.”

As you consider your different options, make sure you choose one that fits within your budget and helps you achieve your ultimate goal with the land.

©2018 Bankrate.com
Distributed by Tribune Content Agency, LLC

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Categories: Real Estate