Real Estate Investing Made Simple - Part 1

By Carole Higgins, Realtor® GRI

on 11/30/21

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里 NOT SURE HOW TO GET STARTED?

There is a lot to consider before you make the leap and become an investment property owner. The first thing to determine is how much money you want to invest. Typically, you need twenty or twenty-five percent of the purchase price as your down payment. Depending on the type of property you plan to buy you may need a bit of a cash reserve. You should also consider whether or not you like real estate as it is likely you will be spending a fair bit of time at your new “baby.” You might also want to consider if you enjoy DIY projects/property improvement projects as this might help you hone-in on the type of property you want to pursue.

 CAN I FINANCE AN INVESTMENT PROPERTY?

You should consider starting to interview lenders. Yes, I said that right- interviewing lenders. You need a lender that is experienced in making loans on rental properties/commercial properties. Don’t be shy about meeting with more than one lender and letting each one know you are meeting with others. Ultimately you want the best financing that you can get, keeping in mind that there is more to a loan than the interest rate. Other things to consider include the amortization period, the term of the loan and the costs associated with obtaining the loan. It is important to work out these details prior to beginning your hunt for your investment property. At this point you should also be thinking about what type of property interests you, commercial or residential.

 HOW SHOULD I PICK A REALTOR® (Your trusted advisor and consultant)?

A licensed real estate agent will be the next professional to consult in your hunt for an investment property. You will want to interview the realtors® as well. The realtor must be experienced in investment property, the type of property you are looking to invest in, and have a solid knowledge base to share. The realtor® will be your trusted advisor who should be able to help you identify the Gross Rent Multiplier (GRM), the Net Operating Income (NOI), and Cash-on-Cash return on any property under consideration. Your realtor should be able to generate a pro-forma that shows you anticipated cash flow, tax deduction and ways of segregating the asset to obtain maximum Return On Investment (ROI), for each property under consideration. A point to consider: a licensed realtor®, experienced in investment property may be able to give you a lender referral to someone with whom they have worked.

 THE HUNT!

Once you have your professional team in place, Realtor® & Lender, the fun begins! Finding a property that will help you meet your investment goals. Once you get started looking at prospective properties you will see that within each type of property there are lots of choices. Residential investment property can take the form of a detached single-family home, a condo or a multi-unit property consisting of 2-4 units located under one roof. If there are more than 4 units or there are multiple structures this property is classified as commercial even though it is residential usage. The difference is that 1-4 units under one roof can be financed on a residential loan (assuming the buyer meets certain criteria). More than 4 units or multiple structures can not be financed on a residential loan, it will require a commercial loan. There are pluses and minuses to each loan just as there are pluses and minuses to each type of property. So stay tuned…or rather tune in next Tuesday for a more in depth look at properties that can be used to generate cash flow and/or tax shelters.

So stay tuned… or rather tune in next Tuesday for a more in depth look at properties that can be used to generate cash flow and/or tax shelters.

️‍♂️See the latest fixer uppers on the market.

Related Articles

• Real Estate Investing Made Easy Part-1
• Real Estate Investing Made Easy Part-2

           

 

Brrrr! We are getting our first real taste of winter this week.  It reminds me of how bitingly cold it seemed when we first arrived in Suttons Bay, 10 years ago.   On the one hand, it seems time has whizzed by- like the blink of an eye.  On the other hand, so many things have happened during those 10 years that it seems like an entire lifetime has passed.  We moved to Suttons Bay to be near family and then BAM! We didn’t have any family again!   We were left reeling from the loss of Greg’s parents.  They passed within a couple of years after we arrived-actually just when our lives had settled into a steady comforting rhythm.  

Then chaos, mind numbing sadness and emptiness.   We dealt with the siblings who stuck around just long enough to settle the estate and then vanished again.  In our grief and sadness we decided to start a second family here in Suttons Bay.  We decided to adopt an 11-year-old girl who was a ward of the state of Michigan.  We dove headlong into the adoption- it gave us a new sense of purpose, something we could do to help just one little person.   We rearranged our work life to accommodate our daughter’s needs.  I drove her to various doctors appointments not less than twice a week.  We met with counselors, teachers, coaches and a whole host of other people, on her behalf.  We even got to know the Sheriffs of Leelanau county whose help was invaluable in managing behavioral issues.  We did our best to give our daughter every opportunity, often to our own detriment.  Sadly, she wasn’t able to adjust to a stable home-life, with us. So we have been working hard to recover and to continue our real estate practice.  I know we have dropped the ball on keeping up with friends, neighbors, and clients past and I have no real excuse.  We have absolutely loved getting to know everyone here and have valued your friendship, your referrals and your business probably more than we ever mentioned to you, for which I feel badly.  

I want to say, “Wee’rre Baack!”  We have gone back to what we know the very best: buying and selling real estate.  Our negotiation skills are still second to very few, as is our creativity in terms of finding viable solutions to help buyers and sellers achieve their goals.  I want to share that we have added some new people- agents and an associate broker named Deirdre.  It is my hope that you are going to be seeing a lot more of all of us next year.  We are planning some very consistent blog postings- timely information that you can use- so check out our Blog posts often.  We will also be sending out items of value from time to time, information you can use, coupons you can use and other good stuff.  If you aren’t on our mailing list you may want to be.  We look forward to hearing from you, seeing you and working with you in the new year.

We hope your holiday season is magical!

Real Estate Becomes A Favorite Investment Again

According to a Gallup poll released last month, a plurality of Americans now think of real estate as the "best" long-term investment, followed by gold, stocks and mutual funds, savings accounts/CDs, and bonds:

FHA Goes Full Throttle with Modernization Effort

FHA green lights acceptance of more e-signatures on mortgage documents.

As part of its modernization effort, the Federal Housing Administration is accepting more electronic signatures on mortgage-related documents. The policy allows e-Signatures on origination, servicing and loss mitigation documents. FHA insurance claims, REO sales and other contracts can also be administered by e-Signature. Under current policy, lenders dealing with FHA are used to electronic signatures being limited to only third-party documents, including sales contracts not controlled by the lender.

"By extending our acceptance of electronic signatures on the majority of single family documents, we are bringing our requirements into alignment with common industry practices," said FHA Commissioner Carol Galante. "This extension will not only make it easier for lenders to work with FHA, it also allows for greater efficiency in the home-buying and loss mitigation process." This new policy begins immediately for lenders who want to use e-signatures on single-family forward mortgages and FHA reverse mortgage products. Lenders still have to follow the Electronic Signatures in Global and National Commerce Act.

Deadline Approaching for New Personal Property Tax Exemption

The February 10th, 2014 deadline for a new and potentially money-saving exemption from the Michigan Personal Property Tax is fast approaching.

Specifically, the law now provides for businesses that own, lease or possess commercial and industrial personal property with a market value of less than $80,000 to eliminate their 2014 Personal Property Tax bill. This is a significant jump from the previous threshold of $40,000, and the inclusion of commercial and industrial property may increase applicability among investors.

Eligible businesses must file the MI Treasury Form 5076 (Affidavit of Owner of Eligible Personal Property Claiming Exemption from Collection of Taxes) by February 10th of this year. Businesses that qualify for the exemption by filing the affidavit on time are not required to file a Personal Property Statement. However, they are required to maintain adequate books and records on the equipment to substantiate the claim.

Big Change For Reverse Mortgages

Get ready for some major renovations in the federal reverse mortgage program.
On Wednesday, the U.S. Senate joined the House in passing legislation giving the Federal Housing Administration authority to alter its Home Equity Conversion Mortgage program, or (HECM), protect borrowers and help the agency avoid a federal bailout. The agency is expected to reveal later this month exactly how it’ll alter the rules, which could take effect as early as Oct. 1.
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Say goodbye to those low mortgage rates

This week, the average rate on a 30-year fixed-rate mortgage jumped another 10 percentage points to 3.91% and are up from 3.3% in early May, according to mortgage giant Freddie Mac. Meanwhile, those seeking a 15-year loan received an average rate of 3.03%, up from 2.56% -- a record low.

Interest rates on the rise