Pros and cons of timeshare investing

US-PDGov

By Andrew Donaldson

It is difficult for the current generation to appreciate that the concept of regular vacations to nice resort areas is a relatively new experience for the average family. Although the wealthy and upper class have always found a way to enjoy their time off, it wasn’t until the 1950s that the opportunity to take regular vacations became commonplace for the working class. As more people began to travel on vacation in the post-war years, hotel chains began to spring up along the highways. An increasing number of resorts followed as popular destinations.

With the number of vacationers growing into the millions, developers offered them the opportunity to gain control over the costs of their trips and stays at nice locations. This concept is based on the idea of fractional ownership, or what is known as timeshare.

In its simplest form, timeshare is an arrangement where several people own and share the use of a specific property. The property is divided into time intervals, usually periods of one or two weeks, and the members of the ownership group use their allotted interval for vacation. When the term timeshare first became widely used, it almost always referred to a home or residence in a vacation area. Today, the concept is adapted to a range of properties, including camping areas, boats, and even airplanes. Any property that has a high cost can be made affordable with fractional ownership programs.

Since most timeshares are a part of a larger development, there is almost always a third-party management company that controls the available intervals of time. The timeshare market has experienced phenomenal growth, and there are now national companies that manage timeshare intervals. With companies like Resorts International, timeshare owners can even swap their times between other properties for a small fee.

Good news and bad news

The timeshare concept is a very practical way for families to make quality vacations more affordable. Because prices for stays in desirable areas always increase, the ability to control that cost through ownership is often a chance to save money over the long term. In fact, many people have made attractive returns on their investment. They achieve this in two ways. First, they rent their weeks out to someone else at rates that generate a profit. Secondly, some timeshare interests appreciate enough that they can be sold at attractive levels above the original cost.

The downside of timeshare results from the same factors that affect any idea that gains rapid popularity. Many developers rushed into the market and created properties that were poorly planned and constructed. They often used high-pressure tactics to sell these properties to uneducated consumers. The result has been a black mark on the industry for many consumers who have lost money on properties worth far less than the purchase price.

Another factor that many people fail to consider or plan for is the ongoing management and maintenance fees that come with every timeshare interest. These costs are usually assessed monthly to all owners on a pro rata basis. Without good management, these fees are burdensome and have a negative effect on the economics of a timeshare.

Many people are attracted to timeshares in other countries. These, too, can be attractive investments. However, they come with their own set of risks and legal issues. It is important to thoroughly understand all aspects of owning a foreign timeshare interest.

With careful and educated shopping, a timeshare can make a great investment for profit and fun. With so many options, it is possible to find many good properties from which to choose.

About the author: This article was written by Andrew Donaldson, a passionate financial guru who loves writing articles across the web to share his knowledge. He writes this on behalf of Wordwide Accom, your number one choice for finding a holiday home, especially in Italy where WWA inspects every Rome apartment on their site. So make sure to check them out when going to Rome!

Love 'em or hate 'em: The pros and cons of HOAs

By Bruce Zander

If you live in a covenant community then it is most likely you’re very familiar with the letters HOA. The HOA or Homeowners Association is the group responsible for setting and enforcing the standards for the community. 

The HOA usually consists of a group of homeowners with sometimes the help of a management company, and the role of the HOA is to maintain consistency, conformity, improvements and conveniences in the community, and protect property values.  

All positive, right?  Not necessarily, depending on the neighbor you talked to, the HOA can sometimes be more of a nuisance than a help.  Like any situation there are pros and cons, you either love ‘em or hate ‘em. 

Love ‘em: Five HOA pros

Here are some ways the HOA gives you a reason to love them.

1. Your monthly or quarterly dues pay for the maintenance of common areas and amenities, like pools, parks, tennis courts, golf courses, club houses and more.
2. The HOA often pay for services, such as snow removal, garbage pickup, even yard maintenance. This ensures that the community will always look good and save you the stress of doing it yourself or hiring someone else to do the chores.
3. If you have a problem with a neighbor, the HOA will step in and help mediate the situation.  They can take care of any issues quickly and without any awkwardness between you and your neighbor.
4. Your property value will not plummet – in fact it may go up. With housing and economy on a rollercoaster, you can have a little comfort knowing that with a neighborhood that has standards and looks good, your property value won’t drop.
5. HOAs often host parties that bring the community together. Block Parties, holiday events and family nights are common.

Hate ‘em: The cons of the HOA

It’s not a perfect world, so there has to be some cons that go with pros. Here are five reasons residents may not like an HOA.

1. It may feel like they’re always watching you. Keeping notes on the length of the grass, what flowers your planting, or if you have a stray weed or two.
2. If you want to sell or rent, the buyers or renters may need to be “approved” by the HOA before moving forward with the transaction.
3. Dues. They can be expensive and be raised by a simple vote.
4. The HOA has the power to put a lien on or even foreclose on your home if you don’t pay your dues.
5. The HOA can be poorly run, many of the members are volunteers with full-time jobs and may not have the time to put in the effort required. There may be inconsistencies.

If you’re thinking of moving to a community that’s governed by a homeowners association, than do your research, talk to the neighbors and weigh the pros and cons of having an HOA.


Guest post created by Bruce Zander, lifestyle writer and resident of the Castle Rock community, The Meadows.

How to easily research an area before you buy your next home

By Salvatore Induisi

Buying a home is one of life’s major milestones, full of decisions and choices. Many concern the type and size of house or apartment, but the location is just as significant. Choosing the right area to live in can be a big factor in improving your lifestyle, and many people see it as just as important as the type of home they should buy.

Crime

Crime is a major factor these days when considering a move to a new area, and you want to ensure peace of mind by finding out as much as you can before making a decision. The traditional method, often suggested by realtors, is to take a drive through the streets at night to see if it seems quiet. This may give you some idea, but it’s not foolproof. It may not be fully representative of the area, or you might just pick on a quiet moment. You might even run into trouble on your fact-finding mission.

Thankfully, you don’t have to put yourself at risk for the sake of incomplete personal research – you don’t even have to leave the house! Simply access the details you need through one of a number of websites giving the crime statistics of any location in America. Sites like spotcrime.com let you zoom in on a map and show all recent misdemeanors in your chosen area, from low-end vandalism and theft up to assault and other serious crimes.

Researching the statistics in this way gives you a much more representative view of all the crime figures in your chosen area, but you should study the data carefully to work out how the information is analyzed and displayed. For example, areas with a high population density will obviously show higher crime rates per square meter, but that doesn’t necessarily mean you will be less safe.

Another great advantage of researching online is that you can find out about a new area from hundreds of miles away! No need to keep organizing trips for repeated visits; whatever your reason for moving long distance, all the information you need is right at your fingertips.

General feel of the area

Finding out about crime levels is relatively easy, and as we have seen the results are already analyzed for us. Other factors in choosing an area are less precise and largely depend on personal choice. Many homebuyers are just looking for a nice area that feels and looks good; they would like to spend some time in the neighborhood before deciding, but this isn’t always possible. Thankfully, if you are stuck in Illinois but thinking of moving to California, various platforms will allow you to zoom in on a map and take a virtual tour of the area.

This feature has already helped thousands of people check out a new neighborhood; they can see within minutes if they like the area and want to investigate further, or look elsewhere. Simple things like trees, architecture, and street layout can all be important, and now you can view these details from street level just as though you were driving around.

Schools and recreation

Education these days is one of the biggest elements in considering whether to move to a new area. Whether you have preschoolers or kids going off to college, you want to be sure you choose the right options for them in the years ahead. This difficult decision is often a deciding factor for parents when it comes to weighing up different locations.

Traditionally, researching into local schools has generally been pretty informal and unscientific. A parent often asks other parents about schools in the area and finds out which one they would recommend. This is a great way to meet other moms and dads and get a personalized view, but it’s not particularly efficient or representative when it comes to deciding your child’s education.

As with so many other things, there are now plenty of online tools to help you find the right educational options in the location of your choice. Sites like greatschools.org offer plenty of choices for potential homebuyers; you can research any area across the States, with results including each school’s specific highlights and facilities, as well as user reviews, and overall ratings.

Don’t forget to check out the local parks and recreation facilities too. They may be less important than your child’s education, but they can make a big difference to your quality of life. Again, you can research online to discover whether your chosen area has the local leisure and entertainment facilities your family needs to relax and spend quality time together, indulge in favorite sports or enjoy other outdoor activities.

House prices

Of course, the major factor for most people in deciding whether to move to a new area will be how expensive it is, especially the local house prices. It’s no good finding a great location if you can’t afford to live there! Fortunately there are a number of websites to help potential homebuyers here too. As well as the price of property now on the market, they show details of recent sale prices, and the average house prices for any given area.

These websites can also be an important tool in determining how much your home is worth on the current market and what you might expect to sell it for – a big factor in choosing your new location. You should also bear in mind other significant costs, such as any specific local or regional real estate taxes, and the actual moving costs, especially over long distance.

Choose the right location

Choosing the right location has long been a vital part of buying a new home, but now the internet has opened up a vast new range of research options. No longer dependent on word of mouth and traveling back and forth (or just hoping for the best!), every homebuyer now has access to as much data as they need. There are even sites, like city-data.com, which combine elements from a number of sources – crime figures, house prices and schools, for example - to provide all the information in one place. Although maybe not quite as detailed as specific sites, it can be a great place to start your research.

This article was written by Salvatore Induisi, owner of SFI Realty which is your #1 source if you're looking for Fort Lauderdale condos and homes.

Renting vs. buying in the Twin Cities

By Ed Michelson

It’s always a delicate question no matter the location. When is it better to rent or to buy? Renting of course has most of the short term advantages. There is the flexibility inherent with renting that ownership simply cannot match. The longer you intend to stay in an area, however, the more and more reasonable it becomes to buying your home or condo. So when it comes to the Twin City area, when does that tipping point come?

Believe it or not, Minneapolis/St. Paul is one of the best cities in the country right now for potential buyers. In fact, according to Forbes, only New York City ranks ahead of it as far as being a cheaper place to buy versus renting. Conversely, this also makes it one of the worst cities to rent in, especially at any term longer than one year.

The numbers speak for themselves. The metro area has an extremely tight vacancy rate, hovering at around 2.5%, which sets the rental rate on average at $965 per month. This figure has steady increased for the last several years, and is up 2.3% from the same time back in 2011. In fact, the National Association of Realtors projects a 4% average increase in rent nationwide this year, and further 4% increase next year as well.

Now take the costs of buying. The average home price is actually down over 30% since 2006, and the market is still struggling to turn that trend around. This makes it quite a bit cheap to buy right now, to the tune on average of $122 per month less. And as the market does slowly rebound, your return on investment grows with it. This highlights buying’s greatest advantage of all, of course; being able to sell if you ever have to move. Even a loss is better than what the typical renter can expect to receive; a diminished security deposit and nice reference letter, if they are lucky.

Long story short, anyone looking to settle in the Twin City areas for any length of time lasting more than a year would be very wise to seriously consider buying. There are several avenues available to the first timer, and while there are also many pitfalls, there are resources and guides easily found that can help to navigate these tricky waters.

Always remember that the traditional route is not the only one out there, and with a little research and old fashioned hard work, it’s possible to get a great deal that will make your relocation all the more satisfying.

Ed Michelson blogs for We Buy Ugly Houses Twin Cities. Visit their website for more real estate tips, or for help with selling a house in the Twin Cities. 

Four keys to finding the right office space for your business

By Christina Adams

When you are running a business, you want to make sure that you are easily accessible. If you are not in a prominent location, your customers will not know where to find you and you will not generate any drive by traffic. The right location is essential to the success of your business. There are specific considerations that you want to keep in mind when you are searching for that perfect office space.

 

Location

If you rent an office space that is in a run down, sparse part of town, you cannot reasonably expect to get a lot of business. Location is half the importance of your business. Keeping this in mind, you want to pick a location that is in a busy area of town, with moderate traffic. Even if you do not offer walk in services, being visible will allow you to get your name out there.

 

Price

It is not worth sacrificing half your monthly budget for that prime corner space if you do not have the business to sustain it. Pricing is important and you want to remain within your budget without going overboard. You should only allot about 15-20% of your monthly budget towards rent or mortgage expenses for your office space.

 

Size matters

Depending on how many employees you have, you will want to rent or buy a space that is able to accommodate all of you. You want to be able to maneuver and not worry about running out of space. You should also rent a slightly bigger space than your needs allot for, if you can. This will give your business the room it needs to grow without making the office cramped.

 

Work with a real estate agent

Sometimes, it is not enough to scout out an office space on your own. Oftentimes, office or commercial space is not rented by an individual, but through a real estate office. Working with a real estate agent will open up the idea to your possibilities. In addition, once you give your specs to the agent, they will only show you properties that meet your needs – including your budget. This way, your search is made relatively simple; instead of difficult when you try to do it on your own.Searching out the right real estate space may take some time. Ideally, you should begin searching for your office space a few months before you plan to move in to give yourself that valuable time.

Christina Adams knows a thing or two about commercial real estate leasing, having worked in B2B real estate for nearly 10 years. She writes on behalf of ThinkBusinessSpace.com.

5 key real estate market numbers and ways to research them

By Marc Padilla

So what the heck is “the real estate market,” anyway? We hear about it all the time, but what does it really mean?
 

For economists, the real estate market is best described as the demand for housing at any given point in time. This snapshot is then used to compare the current market conditions to those at an earlier point in time to determine a trend line. For instance, if sales have increased compared to a year ago, then the market might be said to be “up”; on the other hand, if closings have fallen, the market might be said to be “down”.
 

Simple enough, right? Well, that’s only one way to measure the market. The market can also be measured using several other different metrics, including the average days on the market, the average sales price, or even the average difference between list and sales price, to name just a few. This wide array of possible measurements is why if you talk to 10 different people and ask them to describe your local real estate, you might get 10 different answers.
 
Unlike the stock market, the bond market, or even the commodities market, the real estate market cannot be defined by large barometers or indexes. This is one reason why you can’t watch the CNN news ticker and say, “Oh honey, look – the real estate market lost 100 points today.”
 

So how can you determine what kind of market you have in your area? Let’s take a look at five key numbers you must know before placing your home on the market.
 

1 - Average Sale Price. This figure represents the combined sales prices for all of the homes sold in your local market divided by the total number of sales.
 

2- Average Listing Price. In contrast to what people actually sell their homes for, this number indicates the average price that homeowners are asking for when they initially begin to market their homes.
 

3- Average Difference Between List Price and Sale Price. This number (usually expressed as a percentage) indicates the average difference between what people list their homes for and what they eventually sell their homes for.
 

4- Average Days on The Market. This is the length of time that it takes the average seller from the time she begins marketing her home to the date of closing.
 

5- The Inventory on Hand. This number (generally expressed in months, weeks, or days) represents how long it would take to exhaust the current inventory based on the current selling rate if no more homes were listed.
So where do you find these key numbers that can help you assess the health of your own local market? Here are five ways to explore your local market without even leaving your home.
 

1- Call a Realtor. The fastest way to find this information is to simply talk to a local real estate professional.  Realtors have access to in-depth market research, and most agents are happy to provide this information for free!
 

2- Go Online. Many local boards of realtors and the multiple listing services offer their market statistic to the public. In addition, many chamber of commerce organizations publish community statistics. Two new websites that provide both consumers and agents with high-quality sales data are trulia.com and housingpredictor.com.
 

3- Talk to the newspaper. Most newspapers have a section devoted to real estate, and many update the local market statistics regularly.
 

4- Talk to the assessor’s office. Local governments that tax private property have an assessor’s office whose job it is to determine the value of real estate in the community.  Often this office has detailed market statistics that are of public record and may be available in the office or online.
 

5- Talk to an appraiser. Appraisers are typically hired by banks to assess the fair market value of real estate. Because of this, appraisers must stay current on all of the local trends in the marketplace, and  they can be a terrific source of information.

Marc Padilla has been in the real estate business for over a decade, and recently began consulting for Cold Spring Harbor Homes For Sale.


Refinancing your mortgage with an FHA Loan

By Tony Caro

Among the several programs put in place by the federal government to promote home ownership, there is one that offers homeowners a number of benefits. The FHA loan, insured by the Federal Housing Administration, allows lenders to give would-be homeowners a better deal on their mortgage. This also means that a homeowner has the opportunity to get a mortgage more quickly with easier qualification, a low closing cost and a low down payment.
 

Who Can Benefit From An FHA Loan?
 

There are five situations from which would-be homeowners can benefit from getting an FHA loan.
 

1. Those looking to improve the energy efficiency of their homes can take advantage of the FHA Energy-Efficient Mortgage. This option eliminates the need for homeowners to take out a second mortgage on their home in order to cover energy efficiency upgrades.
 

2. Seniors wanting to get money from their homes but continue to live there can do so with the FHA Reverse Mortgage, which allows for partial conversion of home equity into cash.
 

3. First-time home buyers can enjoy down payments as low as 3.5% of the purchase price of their 1-4 unit property, with fees and closing costs included in the loan.
 

4. Those who need financing for a mobile or factory-built home can take advantage of two FHA products.
 

5. One-loan coverage for those looking to either purchase a fixer-upper home or remodel or repair their current home is available.
 

What's Needed To Qualify For An FHA Loan?
 

There is an income requirement for the FHA loan. Your DTI (debt-to-income) ratio - which is your total monthly household expenses divided by your total monthly gross income - must be at .43 or lower. Looking at your credit report will reveal some of your monthly expenses, which will need to be added to your property taxes, insurance and your new mortgage payment amount.
 

If you are self-employed and have had your business for two years or more, the question of your FHA loan qualification can be answered by consulting your tax return for your net income after deductions. Dividing that number by 12 will reveal your total monthly gross income. However, these aren't the only two ways you can qualify. If your debt ratio exceeds their limits, you may still qualify for an FHA loan if you:
 

-  Have three months of reserve savings in your bank account after closing;
-  Use credit sparingly; 

-  Either paying an amount that equals or exceeds new mortgage payment amount;

-  Can verify an earnings increase;
-  Will see a minimal increase in your housing payment.
 

Why FHA Loans Aren't For Anyone
 

Although the FHA loan has many benefits, as with anything else you're looking to purchase, there are always caveats.
 

First of all, you will have to have some sort of credit history in order to be able to apply for an FHA loan. Even though your credit doesn't have to be perfect, you will need to show at least some evidence that you are capable of handling credit. There may be considerations for extenuating circumstances, such as when a wage earner falls ill, as well as for bankruptcies and collections.
 

FHA loans come with a 1% up front, and 0.85 to 0.9% annual insurance premium for the first five years. And this is regardless of whether or not your home has sufficient equity or your loan to value ratio is 20%.
 

You will also see a lower loan amount with FHA loans, which means you may not be able to borrow as much as you need.
 

Finally, there are fewer options for home loans with FHA than there are for other loaning institutions. This is because the FHA loan serves the basic needs of a particular group of buyers. As such, the loans are of low risk to lenders.
 

The FHA is just one option when the goal is to become a homeowner. Understanding which options are available to you can mean that you're more informed when the time comes to make a decision about how you want to handle your mortgage.

Citations:

• Information on FHA Loans
  

Guest author Tony Caro writes on a variety of topics, and is particularly well-versed in the topic of refinancing your home mortgage.  He is a frequent contributor at http://www.refinancehomemortgageguide.com/.  You can also find Tony on Google.

Home Selling Tips for Missouri Residents

The Missouri housing marketing includes cities such St. Louis, Kansas City, Columbia and Jefferson City. There is also a housing market for vacation, rural and smaller cities and towns in places like Lake of the Ozarks, Branson, Springfield, Blue Springs etc. The housing market is different in many of these areas due to Missouri demographics and economics, but similar to other States in terms of the national or regional economy and housing market.

Naturally, selling the home at a time when the most money can be easily acquired for the home is ideal. However, in both tough and smooth markets, and for Missouri housing markets, it can be helpful to 1) know your market, 2) place your home in the market properly, and 3) make your home worth buying. This article will discuss these 3 points in the following sections.

Section 1: Potential market for Missouri home buyers

Knowing each individual market within Missouri can be helpful in assessing who the appropriate target market for the home may be and whether or not real estate investing is a good idea in that market. To illustrate further, the State of Missouri has several unique characteristics that can be indicative of its potential home buying markets. Some attributes of the State of Missouri that assist in defining the market for people with homes for sale in Missouri are described in the next paragraph.

Missouri is a State that borders 8 other States so it also sees a lot of interstate traffic. The State is also home to several Universities including the University of Missouri system which includes Columbia, Kansas City and Rolla. Jefferson City is the Capital of the State and the State currently has a Republican led Government. The State is home to several National sports teams including the St. Louis Cardinals, Kansas City Chiefs, and Kansas City Royals and has a significantly large agricultural community and economy.

Due to Missouri's diversity, economy, location, social demographics and location in the United States, several distinct population groups may be more likely to seek out homes to buy in various parts of Missouri. These groups are potential target markets for people with homes for sale in Missouri, as mentioned in point 1 in the 1st paragraph above. A few of these potential markets are listed below in no particular order.

• Interstate truckers

• Agricultural workers, administrators, farm owners etc.

• Out of State professional relocating to Missouri

• Newly wed couples and new families

• Recent Doctoral and/or Fellowship enrollees

• House flippers, investors and up-graders

Section 2: Placing a Missouri home in the property market

After a target market is identified, pursing that market is just as important as identifying it. Placing your home for sale in the market properly is an essential step for people with homes for sale in Missouri. This involves making buyers and potential buyers aware of the property, facilitating the process of learning about the real estate and encouraging interest in the home. Several general methods can be used to promote this process, however additional techniques unique to each market and micro-market may also be beneficial.

To place a property on the market the home can be listed independently, or via a Real Estate Agent or Realtor. If put on the market independently, being very clear on the home buying and selling process is important as there will be no agent to assist if one is not used. Secondly, if an agent or Realtor is utilized, get a feel for their marketing style, efficiency and know how. An effective and helpful Agent or Realtor can have a considerable impact in properly placing a Missouri home for sale in the housing market.

• Make sure the home is listed in the MLS or FSBO system

• Talk to neighbors, family or friends about the home

• Advertise locally and in addition to the Agent or Realtor's efforts

• Be aware and make use of up to date and helpful marketing tools

• Actively seek out buyers most likely to be interested

• Provide seller financing if possible

• Have a good and legitimate reason for selling

Section 3: Making a Missouri  home worth buying 

Once the home for sale in Missouri is placed on the market, making the home attractive to buyers is also important. Different people have different concerns, look for certain things in a new home and naturally want to get the most for their dollar. Appealing to these interests is beneficial in promoting the home for sale in Missouri in addition to helping make the property worth buying.

To help make a Missouri home that is for sale worth buying several general and specific methods and techniques can be used. General techniques include selling ideas that assist in attracting Missouri and out of State home buyers/target market on a broad level. Specific methods for making a Missouri home for sale worth buying include more focused, localized and micro-market specific. For example, many people like homes to have aspects such as functional wiring, plumbing, doors, cleanliness etc. Some general things one might consider in making a Missouri home for sale more interesting are listed below.

• Price the home at or slightly below neighborhood homes with similar features

• Only upgrade the home for those things that add more value than the lowest cost

• Remove clutter from home and tidy lawn

• Repair cosmetic flaws of the home

• Offer a reasonable asking price

In the case of more specific markets may be interested in things like proximity to good schools, neighborhood characteristics, location near work or in certain areas close to parks, churches, commercial venues etc. It's difficult if not impossible to appeal to everyone within your target market so becoming aware of the more probably home attributes that are more likely to appeal to a larger market can be a good way to approach the step of making a home worth buying for people with homes for sale in Missouri. Some specific ways that may make the home worth buying for home-buyers in Missouri include the ideas listed hereafter.

• Similarity of home with neighborhood traits, ex-proportional square footage

• Features that suit the surrounding environment, ex-shed for large lawns

• Suitable space for vehicle(s), ex-double driveway or parking garage

• Cost saving features, ex-energy efficient windows

• Interior design, ex-bathroom with a fan

Summary

For people with homes for sale in Missouri, selling can be easy or difficult depending on overall market conditions. However, making use of methods and techniques that can help sell a Missouri home within less time can be worthwhile in some cases. The steps in this article address improving prospects for selling a home in Missouri, but don't guarantee that such methods or techniques will be successful. Those techniques include identifying a suitable market, promoting to those Missouri and other home-buyers within that market and appealing to those home buyers' interests, wishes and/or expectations for a home.

Tips for Selling a Home at the Right Price

"Sold" is the word all home sellers are after, and for the best price possible, and in as short a time as possible after the house hits the market. To have a house hit the ground running takes some consideration of a couple of C's, one L, a couple of R's and one P; namely clutter, cosmetics, landscaping, restoration, repair and price. 

It may seem like a lot but some of these things can be done with a little time and patience and cost effectively. Keep these things reasonable in terms of cost and also remember neighborhood price ceiling is important as a house that is rejuvenated beyond the class of a neighborhood will have a tough time selling at a price that compensates the owner for all the time, energy and money put into the house. So be wise with a house and perhaps most of all show it some love. The following sections of this article outline some of the things potential home buyers look for in a house.

Marketing venue

Another important step in preparing a home for sale is making sure everyone knows about it. Finding a suitable venue to market the property can prove priceless in selling a home. A motivated Real Estate agent or Broker may be the right solution for you if you don't have a lot of practice selling homes or with the lengthy paperwork procedures required. Also, owner-financing options may be appealing to those buyers seeking an alternative to a bank mortgage thereby increasing potential interested buyers.

Reduce clutter

Realtors and Sales agents will repeat the mantra clutter is bad for home sales. This is true because of market perception, a cluttered house reflects a possible unkempt house, and is simply not as visually appealing as a house that looks like it came off a beautiful homes magazine cover page. The less things lying around the house the better as more space is added to the appearance making the house seem bigger and cleaner.

Cosmetics touchups

The small things do matter. For example, those little door stoppers that cost a couple of dollars at the hardware store not only protect the walls from doorknobs but they're easy to install and cost effective. Door stoppers show love and prevent damage; with a little time just about anyone can install these little but important house amenities. The list of cosmetic touch ups are endless, but the principles of low cost, rejuvenation and damage prevention still apply. The more cosmetic touch ups one can do, the better the house will look to potential buyers.

Landscaping

If you have a yard, a little beauty can go a long way especially if the house is up for sale in the late spring, summer or early fall. Selling the house in the season your house looks best can also give the impression of beauty and finesse. Also, when this technique is used mother nature does a lot of the work and for free. Besides mother nature, keeping lawns mowed and trimmed, installing some tasteful plants in a flower bed and removing yard clutter can also improve the saleability of a house.

Price

The price of a house is important for the buyer, the seller and the agents if there are any. Everyone wants a deal and that can be tricky. Choosing a price that is realistic, and fair to everyone will probably earn a homeowner a little less profit but a bird in the hand may be better than two in the bush. Pricing can be complicated and involve tax implications, profit, market timing and other factors. For this reason think carefully about a price and discuss it with an agent and/or family members

Repair

It is sometimes unavoidable, but houses do need repairs just like cars. Things like holes in the wall, broken rafters, damaged siding, doorways, windows, foundation etc. all have their place in the re-saleability of a home. Inspectors will generally find what's wrong with a house and savvy home buyers also know what to look for so trying to hide these things probably isn't a good idea as it could create mistrust and a no sale. Being fair with repairs fixing what is important, and perhaps negotiating other repairs with a homebuyer for a reasonable deduction in home sales price could get you the sale you are looking for.

Restoration

Some homes if not many have flaws in one place or another. Prioritizing things in need of repair can make the task more manageable and cost effective. For example, if the furnace is 17 years old and you live in a climate with cold winters and the driveway isn't paved but looks like a weed festival which is more important to a new homebuyer? Chances are a buyer would appreciate a new furnace more than a concrete driveway. Functionality of a house is important and home buyers don't always want handy man specials. Restoration may also involve less expensive things like paint, wall trim, door knobs, broken pieces of fence, faucets, vents, linoleum etc. Installing and rejuvenating many things in a house can be cost effective and do wonders for a house.

Summary

Homes are great places and a home treated with love shines. Selling a house can be stressful and exciting especially if the homeowners are attached to the house and are moving to a new house. Homes take time to rejuvenate, but time on the market can be bad for a house for sale. Using various techniques and methods provided above can improve the saleability of a house and that is good to know. There may be some things about a house that only a homeowner knows about like a giant snake living in the basement or ghost like apparitions that appear at 2:00 Am every Wednesday.

If these anomalies plague a home and that is the reason for selling it might be better not to mention them in the disclosure form or to the buyer but doing something about them before the house goes on the market might be a good idea too. If the seller puts him/herself into the buyers shoes and thinks what they might want when buying a house it can help in the choice of preparations involved. 

To illustrate the previous point, if the home is a family home, preparations that a family would appreciate would probably be more beneficial than preparations that suit a single musician who needs a lot of space for musical instruments and acoustics. The list of considerations to think about when preparing to sell a house can be extensive but with a little practice and some good direction it can be manageable and doable.

How Much To Save Before Buying a Home

Knowing how much to save for a home is about more than just down payment if you're not paying for the property in cash. Purchasing a home is a often a large financial decision involving quite a lot of up front real estate purchase costs including future mortgage payments in some cases. 

In the United States, there are real estate purchase costs apart from the mortgage down-payment that may also be required at the time of sale. For example Realtor commission, closing costs, prepaid tax, mortgage insurance etc. may all be costs included in a mortgage contract. If the property is international, less costs may be required depending on the real estate regulations within that country. This article will discuss knowing how much to save for a home in terms of the following items:

• Down payment

• Mortgage and hazard insurance

• Closing and additional costs

• Property taxes

• First month's expenses

• Realtor commission

Downpayment

The down payment is the most obvious and essential cost needed for a new home. Depending on the type of loan this could typically range from a few percent to 20% or higher. Some owner financed homes may offer a rent to buy program where the buyer accumulates a down payment through the initial month's rent and then converts to a mortgage thereafter. The down-payment amount could be as low as a few thousand and as high as 10's of thousands or more dependant on the market value, location, and mortgage requirements if any.

Mortgage and hazard insurance

Mortgage insurance may not be required if more than 20% of the home's value is paid for in advance via down payment. Otherwise, mortgage insurance may be required by the lender. Moreover, for the owners own interest and that of the mortgage company, hazard insurance requirements can also be levied upon the tax payer. In real estate investing, having insurance can also hedge against investment risk. This insurance if combined with auto insurance may be discounted due to multi-coverage discounts offered by the insurer. Typically, mortgage and hazard insurance may run about $100-$200 per month combined. Sometimes, mortgage companies will require advance payment of one or both these types of insurance which don't necessarily include flood protection.

Closing and additional costs

Closing costs can add up to a few thousand depending on the percentage required by the mortgage company. For example, on a $125,000 USD property, a 2% closing cost fee would cost $2,500. In addition to the closing cost are other related fees having to do with the home's title, deed documentation, and other charges that might be added into the mortgage. Moreover, some loans require inspections to be performed to insure the quality of the home meets acceptable standards and to help protect the home buyer from unforeseen costs and expenses. The closing and other costs could end up costing between $2000-$5000 depending on the sale price of the real estate.

• Title registration and transfer

• Title search

• Property appraisal(s)

• Property inspection(s)

• Closing fee

• Miscellaneous expenses/'Junk fees'

Property taxes

Property taxes are levied by local government and vary in cost, but 1-2% of the home's 'assessed value' is an approximation that can be used when estimating the tax cost on the property. For State property tax values or exact tax percentages consult local government tax listings or a property tax comparison chart. Property tax may be required to be paid into an escrow account on a monthly basis. Thereafter, the mortgage company may pay the property tax separately to help insure the stability of the mortgage and it's loan to their client. This also consolidates payment of taxes for the mortgagee which can be helpful in bill paying.

First month's expenses

First month's expenses include mortgage payment, insurance, utilities, taxes and even furnishing and repairs to the property. Thus, it is possible the first month's expenses for a new property are going to be higher than in subsequent months. For this reason it can be a good idea to plan ahead financially in anticipation of such expenses as there may be items not mentioned in the seller disclosure that need repair, or the real estate may have been a foreclosure with property damage or you may simply want to customize the property to your taste. In such cases, an extra $1000-$4,000 or more can be needed and in some cases required by the mortgage lender.

Realtor commission

Unless a for sale by owner (FSBO) is used and the buyer does not seek the assistance of an agent or Realtor, a commission fee is paid to the facilitating agents of the home's sale. These fees typically range from 5-6% and may or may not be worth the cost depending on the buyer's experience, know how and ability to negotiate. An agent's cost may sometimes end up costing less than had an agent not be used at all due to the agent's knowledge of the marketplace and property purchase techniques. On a $125,000 property one can expect to pay around $6-$7,500 in commission.

Considering a Short Sale as an Alternative to Foreclosure

Property short sales are a real estate maneuver that can protect a home owner from some of the consequences of outright foreclosure. The "short" in short sale is the value of the home loan that is not paid off through the sale making it a short on funds sale or closeout special. For a short sale to be accomplished, a homeowner's mortgage lender must approve the short sale which can make things complicated since they are likely to not profit from the deal.

How to short sale

To accomplish a short sale a homeowner must obtain a buyer with cash or pre-approval from a financial institutions. Pre-approval is a written guarantee if loan from a lender for a certain amount of money and is different from pre-qualification which is simply an acceptance to consider an application for financing.

Additionally, once a funded buyer has been found, the bid offer for the home must be presented to the existing mortgage lender(s) for consideration. This process may involve multiple lenders in the case of 2nd and 3rd mortgages and has the potential to become complex.

Benefits of short sales

Accomplishing a short sale may be difficult to achieve but can also be worth the extra effort because it is less damaging to one's credit, and more helpful to future mortgage applications than a foreclosure. Some of the benefits of short sales are also advantageous to home buyers. A summary of the advantages of short sales of homes is provided below:

• Helps protects home owner from complete foreclosure and/or bankruptcy
• Allows the lender to quickly negotiate a settlement
• Can be a bargain for the buyer
• Provides an intermediate solution to an otherwise potentially damaging situation

Disadvantages of short sales

Short sales are not all perfect, expedient and easy transaction that can be accomplished overnight. Due to the involvement or Realtors and or brokers, financial institutions, city filing requirements, legal considerations etc, real estate deals of any kind can be complicated. Short sales tend to complicate real estate transactions more than simplify them. A few of the disadvantages of short selling property are listed as follows:

• Extensive paperwork requirements
• Negative affect on credit rating
• Loss of equity in home
• Unfavorable scenario for original mortgage lenders
• Property tax will still be payable

Tips to consider when short selling

As with any property deal, it can be a good idea to be prepared, informed and capable of carrying out the necessary steps to close a deal in as quick a time as possible, for as best a deal as possible. For these reasons, several considerations are provided below in the form of "tips" to assist a short seller in accomplishing and/or familiarizing with the process so in the even a short sale is required, the reader may be more informed as to what to do.

• Sale amount: Short Sale for an amount greater than market value but lower than the mortgage value.

• Closing and Settlement Fees: Negotiate closing and settlement fees into the cost of the short sale and/or the buyers contract if possible.

• Research: Know the consequences of the short sale in terms of cash flow, credit record, and tax implications. Also become thoroughly familiar with the process before undertaking a short sale.

• Study: Studying the neighborhood of potential homes, the conditions of the homes, the market prices of homes in that neighborhood and the foreclosure statistics can all help determine whether or not a property is worth short selling.

• Communicate: Contacting homeowners who can't afford to keep their home and their banks can be a good prerequisite in determining the chances of the short sale not falling through. Asking questions about

• City and/or County Taxes: Some mortgages have taxes built into the monthly payments, in such cases one may have to do very little in the case of taxes. However, if this is not the case, contact the city or county for tax due can assist in knowing how much money will be needed to successfully close a short sale.

Short sales are like mortgage parachutes that may or may not open depending on the buyer financing, lender amenability to the short sale, proving inability to pay a mortgage and successful negotiation with involved parties. The winners in a short sale are more likely to be the buyers and brokers who may either obtain a discounted home or a commission on the loss of a property. 

Short sells are similar to foreclosure sales in the sense they are the purchasing of homes that are not able to be lived in by tenants. However, short sales are kind of a step ahead in the sense they purchase the home before the foreclosure process rather than after.

Sources:

1. http://www.howtodothings.com/real-estate/a3395-how-to-short-sell-real-estate.html
2. http://www.creonline.com/articles/art-240.html
3. http://www.totalrealestatesolutions.com/articles/disp.cfm?aid=220&typeid=1

How to Determine the Value of Your Home

To determine the value of your home involves understanding what it is realistically worth, and what price the home will be more likely to sell at. This can be done using a number of methods including property appraisals, median area income, your home's historical cost basis and local property tax numbers to attain a realistic price range and base target number.

Pricing your home yourself involves combining numerically calculations and home specific evaluation. This determines a real estate value that is adjusted for factors such as home size, street sales, market conditions and home improvements for a more balanced home valuation. The following steps illustrate the different ways your home's value can be determined.

• Quantitative assessment

1. Determine home value as percent of tax

Each state charges different average percentages of property tax. Using the National Association of Realtors (NAR) Metro Median Price Map the median property tax paid can be used to calculate the median home price. For example, if the median tax paid is $1,733 and the tax rate is .66 percent then  $1,733/66= (26.2575 x 10,000) = $262,757.75. Alternatively, $1,733/.0066 = $262,757.75. This is the price of homes in your area based on median property tax paid.
2. Use median income to calculate home price

According to Fannie Mae, a national mortgage buyer, the 2010 average median income in Fairfax County, Virginia is $103,000. Using the CNN home affordability calculator, accurately enter in the average median income and additional data with $0 monthly debt. The result will yield a low and high minimum house price, in this case a low of $458,558.90 with .66 percent tax, 3 percent down-payment, $0 debt, and $103,000 income.

3. Identify inflation adjusted home value

Inflation adjusted home value can be estimated using The Federal Housing Finance Agency House Price Index (HPI) calculator if the home is being sold. This will give an value of the home based on area house price market movements using the original purchase price and date of the home. The results for this method are reasonably good and will give step four a stronger base value with which to work. For example, a home bought for $200,000 in the same area as step two in 2002 would be worth $295,904 using the HPI calculator.

4. Create house price range

Using the home prices in steps one and two, a range of average home value can be determined. The third value or HPI number gives you a cost based estimate that could exceed the high value of the price range. This price range gives you an idea of what prices you could realistically sell your house for and if your home is priced above average market costs. For the example in this article the house price range is $262,757-$458,558 and the cost based adjusted estimate is $295,904.

• Qualitative evaluation

The above method does not take into account differences in home models such as home improvements, maintenance, neighborhood conditions, local demographic trends etc. For this reason a qualitative appraisal is also helpful, if not essential, in determining the value of your home. For example, two 2 bedroom apartments on the same street could sell for a difference of thousands of dollars because home A included a hot tub.

When making a qualitative assessment add or subtract value from the value in step 3 above  and compare that price to the cost of homes sold on your street. For example, using Zillow.com, you can get an idea of what similar homes are selling for in your area. Realtors and Real Estate Agents may also be able to provide you with recent home sale statistics for your neighborhood.

After performing a quantitative and qualitative assessment of the value of your home, you may compare your results with those of professional appraisers if you choose to do so. In such case, depending on who is doing the appraising, the values may differ a lot based on the purpose of the appraisal. For example, an insurance appraisal or tax appraisal may be lower than a market appraisal.

Sources:

1. http://bit.ly/cwQwjq (Federal Housing Agency)
2. http://bit.ly/gbUd (CNN Money)
3. http://bit.ly/RsmqB (National Association of Realtors)
4. http://bit.ly/cz0Bhq (NAR Tax map)
5. http://bit.ly/bnPnoe (Fannie Mae)

Where to look to get the best mortgage rates

Looking for the best mortgage interest rate need not be complicated or difficult. To make it less difficult, first identify the type of loan you are looking and qualify for, then find out what companies or organizations service these types of loans. For example, if you are seeking affordable housing solutions and have a low to medium income, you may even qualify for a zero percent forgivable mortgage through programs such as Community Frameworks. Similar programs exist nationwide, but are subject to resource and application limitations.

For mortgage borrowers who only qualify for non-subsidized mortgages, good rates can still be found. The most recent edition of a national newspaper's business section should have basic average mortgage rates such as 30 year, 15 year and Adjustable Mortgage Rates. Sites like mortgageloan.com can help you look for and compare the best  average mortgage rates by region, loan type, loan amount and credit.  However, this does not mean you can't get a lower rate than the national average. This is because other factors can influence what your actual mortgage rate will be.

• Regional differences

Different regions of the country may be experiencing different economic conditions which can also influence mortgage rates. For example, Nevada, California and Florida all experienced large home price depreciation and foreclosures in the years following the housing bubble burst in 2007-2008. These conditions may make mortgage rates in these areas lower than in other areas of the country. For example, on October 22, 2010, several of the 30 year fixed rate mortgages on Zillow.com were quoted at rates as much as 50 basis points or half a percent lower than the national average of 4.24 percent.

• Selecting a financial institution

When looking to get the best mortgage rates, another thing to consider is the financial institution or mortgage lender. If you are purchasing a home directly from an owner via a rent to own type situation, the rate may be privately negotiable as the lending formula is probably not the same as a mortgage bank. Mortgage banks and banks that offer mortgage loans may differ due to competition. For this reason where you look for mortgage rates in your area could yield several different rates.

• Type of mortgage loan

The type of mortgage product can also influence what you find in places that offer mortgage loan products. For example, the rate and terms of a 203(K) FHA mortgage rehab loan can differ from an REO mortgage on government owned property. Each loan may be subject to different housing regulations and therefore varying interest rate allowances, benchmarks and restrictions. This is especially the case with government and non-profit mortgage loans.

• Mortgage rate variables

The best mortgage rates are dependent on a few financial variables that are ideally factored into the equation when looking for them. A mortgage loan officer should be able to inform you about some of these factors when applying for a mortgage. A basic rule of thumb is the less risk there is to the bank, the lower the rate will be. Risk is calculated using debt to income ratio, credit score, down payment amount, asset worth etc.

• Lowering mortgage rates

After having looked for the best mortgage rates and found some ballpark estimates you then have a mortgage rate with which to improve upon. For example, if you are looking for a 15 year refinance for under $100,000.00 what can you do to lower the rate from the existing quote you are given by a broker, online rate quote, or mortgage lender?  For example, you may be able to purchase 'points', which is essentially an extra upfront cost that is entered into your good faith estimate and lowers your mortgage rate.

Sources: (Date of record, October 22, 2010)

1. http://bit.ly/a74Pny (Zillow.com)
2. http://bit.ly/agLURp (Community Frameworks)
3. http://bit.ly/c4SZMo (Mortgageloan.com)
4. http://bit.ly/2VAul8 (HUD)
5. http://bit.ly/anU2YX (Fannie Mae)

Tips for Getting a Mortgage on a Small Property

If an individual can afford consistent monthly rent payments, that individual may also be able to make payments on some small property mortgages. While mortgages may not be right for everyone, mortgage loans for small property can be more manageable than a larger, potentially less practical mortgage loan. This article will illustrate some of the key issues pertaining to the mortgage acquisition process and provide tips and ideas that may useful for persons wishing to obtain a mortgage for small property.

Personal considerations

Obtaining loans for and owning property involve more time and effort than renting, however it may be worthwhile if more freedom, financial control and individual responsibility for property is called for. Mortgage loans are also used in real estate investing to leverage income potential. Before tackling the financial issues of a mortgage, a couple of personal reflections may prove beneficial in the property buying process.

• Assess Personal Needs and Traits: Mortgages may not suit everyone. When owning property there is more personal responsibility for property maintenance and repair that in the case of rental agreements may be taken care of by the property management company.

• Forecast Future Living: If one has a young family or is moving into the empty nest stage of life, a smaller property may or may not be a necessity. Knowing what living requirements would be most suitable ahead of time can help one determine whether a small property mortgage is the right thing to do.

Financial considerations

• Loan Type: There are many mortgage loan products available on the market. Finding the right one can be the difference between an out of control housing situation and a constant and manageable real estate loan. Some loans require home appraisals and high credit standards while others may require average credit scores but high earnings capacity.

• Mortgage Lender: Determining which mortgage lender is right is an important step in finding a mortgage. A few good places to start inquiring about loans may include large and small lenders alike. The Federal Housing Administration (FHA), and other well established financially solvent mortgage lenders such as Fannie Mae, Wells Fargo and Company or Bank of America constitute some of the reputable national lenders. Additionally smaller, fiscally responsible local banks may also be ideal depending on where one is located, one's relationship with the bank and the loan product.

• Additional Expenses: Property ownership can involve additional expenses such as home warranty agreements, utilities and replacement equipment. In a rental agreement, many of these additional costs are paid for as defined in the lease terms. Being aware of the potential for such additional expenses can make home ownership less of a surprise and a more realistic proposition.

• Cash Down Payment: The larger the up front cash payment, the lower the monthly mortgage payment and monthly expenses will be. Things like mortgage insurance and higher interest rates can be waved with large down payments making them a good idea if feasible. Moreover, if it is affordable, a 20% or higher down payment may be a good idea if that capital can't yield a higher return than the savings from lower interest payments.

• Affordability: Mortgage companies that issue prime loans have tougher restrictions for obtaining mortgages of any size. Factors they are likely to consider are monthly income, capital savings, credit history and asset values. Typically, mortgage companies base mortgage loan calculations on the 29% rule where the 29% of one's pre-tax income is used to assess how much loan a buyer can take on.

Property related concerns

In addition to personal and financial considerations, there is another relevant element to the mortgage 

buying process. Specifically, the property itself is a factor because small properties are not always cheap or a good investment. A few matters relating to the property itself are as follows:

• Location: If the small property is located in a high-priced area of downtown New York, or London, it is not likely to be cheap. Thus a small property mortgage does not always equate to an affordable mortgage.

• Condition: Older homes tend to have greater potential for costly restoration and repair making a small mortgage less practical. Even thought the mortgage may be small in such an instance, the cost of maintaining the home may not.

• Insurance Costs: Insurance costs such as hazard insurance can add a nice chunk of cash to a monthly mortgage payment. If one lives in an area or region prone to natural disaster, the cost of insurance will likely increase the cost of the small property mortgage.

Small property mortgages are not that different from large property mortgages. They may be more manageable if certain conditions such as location, age of home and insurance costs don't inflate the actual cost of the mortgage. Before obtaining a small mortgage loan it may be a good idea to ponder some of the information and tips contained in this article. Doing so may better prepare one for the potential hidden costs, living consideration and utilization of financial strategies.

Calculating Your Return on Real Estate Investments

Calculating return on real estate investments at its most fundamental level involves subtracting all the costs paid into a property from both revenue earned during the term of ownership in addition to selling price. Subtracting the buying price from the selling price is simply not an accurate way to determine real estate return because there are so many underlying benefits and costs associated with property ownership that occur on an annual basis.

In other words, real estate investing is complicated by the myriad of revenue and cost sources incurred over the term of ownership. Furthermore, in the case of real estate investment groups, and property managers, calculating return on investment is more of an annual than end game operation making profitability, and debt calculations in the form of percentages and ratios rather than simple positive or negative numerical amounts quite relevant in the assessment of return on investment.

To simplify the return on investment a good approach can involve staying organized throughout the whole investment process from start to finish while simultaneously utilizing the numerous techniques and tools involved in assessing return on investment. This means keeping track of and recording every dollar and cent put into the property and every dollar and cent returned in the form of capital gains, and tax benefits. The following sections break down the property investment process into the fundamental units of revenue, cost and techniques that can assist in the calculation and assessment of return involving the revenue and costs from the sections below.

Sources of property revenue and expense

The sources of property revenue tend to less than the numerous costs and expenses that a property can incur. For this reason it is quite vital to maximize and optimize the potential revenue of a real estate investment in order to make it worthwhile. Two lists comprised of both the source of property revenue and expense are listed as follows:

1. Source of Property Revenue:

• Capital gains (after deduction of overhead if applicable): "Profit" on the sale of the property as calculated in terms of purchase price.
• Rental income: Income earned through lease, rental or use of space by a third party.
• Tax deductions: Tax savings such as mortgage interest,
• Tax Credits: Additional tax savings such as renovation credits

2. Sources of property expense:

• Original settlement costs of real estate: All costs associated with purchase of property
• All maintenance and renovation expenses: Upkeep, repair and remodeling.
• Operating expenses/Overhead (if not deducted from capital gains): Utilities
• Total ammortized interest payments at time of sale: The sum of total interest payments
• Tax on Capital gains: Government tax incurred from profit on the sale of property
• Hazard Insurance: Protects against losses from unforeseen events
• Mortgage Insurance: Premium paid as a protection feature should the real estate enter default or foreclosure. (this expense can be avoided in some cases)
• Government Recapture tax (If applicable): Tax associated with sale of property financed by Government sources.
• Back end expenses associated with sale of property: All costs associated with sale of a property.
•Opportunity cost (if applicable): The potential loss of profit due to fixed nature of property investment i.e. loss of revenue from missing a more profitable investment
• Inflation: The cost of inflation is also an expense as this can amount to approximately 2-3% of the total value of a property per year.

As evident from the above list, there can be many more sources of expense than profit from a property investment which hints at the necessity for fiscal prudence and keen judgment when purchasing property. When purchasing a property it may be helpful to forecast and estimate the total costs of the property purchase and estimated market value of the property at a future time to assess whether or not the investment will be profitable. It can be easy to overlook some of the many expenses and costs that go to into a property making the purchase and sale prices of property somewhat inaccurate measures of the profitability of the real estate.

In essence, calculating the return on real estate investments is a numerical balancing act combined with market forces, and investment savvy. Knowing the dynamics of the real estate market, trends, property factors such as upkeep, maintenance and renovation expenses etc. are all important to turning a profit in addition to optimizing as many of the possible benefits of property as possible. The benefits of property ownership include all sources of savings, expense reduction, income and capital gain that can be squeezed out of a property.

Tips and techniques to consider in calculating return on real estate investment

One of the most opportune times to calculate the return on real estate is before it actually happens in the form of a property profile. In other words, assessing all the potential advantages and disadvantages before the property is even purchased can not only help in future calculation of return on investment, but also the front end costs. The tips below can help with the calculation of and the forecasting of return on real estate investment.

• Develop a bookkeeping system
• Utilize Investment return equations in forecasting return
• Investigate all tax implications, costs, and benefits
• Assess market conditions and real estate potential
• Optimize property income
• Reduce costs

Return On Investment Equations and Software

When forecasting and calculating annual rather than total end profits on real estate, numerical equations and software tools can be used to calculate return on investment. These tools can be especially useful amidst business property investments within fluctuating market conditions. In other words these tools help organize the many variables of property management into orderly numerical functions that provide quick and accurate answers provided the input numbers are correct. A few examples of such equations are listed below:

• Debt Coverage Ratio: Operating Income/Mortgage costs (associatedcontent, Butler)
This equation measures annual income as a percentage of cost. A division ratio that assesses profitability in terms of a ratio result rather than percentage amount. Also useful in assessing debt.

• Capitalization Rate Valuation: Net income before mortgage expenses including operating expenses/Capitalization Rate i.e. annual percentage rate of return(ezine.com, S.Gillman) Helps assess overall property value in terms of annual income before mortgages expenses are deducted.

• Total Yield: Annual Income/Sales Price (associatedcontent.com, Butler)
Measures annual income as a percentage of sales price and therefore does not include expenses and costs.

• Cash on Cash Return: Annual Income after mortgage costs/ Downpayment (associatedcontent.com, Butler) Provides an annual estimate return on initial investment after costs and is good for assessing real estate investment risk and opportunity cost.

There are also several software packages and online tools that can be utilized to calculate annual returns on real estate investment. It can be a good idea to have a strong understanding of the big picture when utilizing such tools because the tools themselves only measure isolated circumstances of revenue and cost variables.

In other words, in order to acquire an accurate assessment of return one must 1) enter the correct input variables and 2) correctly sum and utilize the outcome of all applicable equations. That is to say estimated income and credibility of the equations should be sound. The more such equations are used, the more complete the overall return on investment assessment is likely to be. An example of a free online real estate return calculator can be found at the following link.

http://www.frontdoor.com/tools/calculators/return_on_investment.aspx

To summarize the above, calculating return on real estate revenue is essentially a simple task. However, this simple task is complicated by the multiple and ongoing costs and sources of cost reduction associated with the ownership of a property. For this reason, sound bookkeeping and awareness of all the variables can be of great benefit to accurately assessing the real return on a property.

The many costs and expenses of property are sometimes overlooked when making the investment return calculation in addition to overlooking the potential reductions to capital gains such as maintenance costs and environmentally friendly renovations that may incur a significant tax credit translatable into gain from ownership of property before the property is even sold.

Sources:

1. http://athenianloans.com/Tax_Effects.html
2. http://www.HousesUnderFiftyThousand.com/due-diligence-checklist.html
3. http://ezinearticles.com/?Say-Goodbye-To-The-Gross-Rent-Multiplier&id=303508
4. http://www.associatedcontent.com/article/27644/calculate_the_return_on_your_real_estate.html?page=3
5. http://www.community-newspapers.com/archives/lgwt/20060222/lgperkins.shtml