Mortgages – Some Important Points You Need To Consider

There are many potential perils and pitfalls that a borrower can face when buying a home and taking out a mortgage. Many borrowers can fall foul of these perils due to misinformation or a misunderstanding.

Read on as we try to discover some common pitfalls facing the potential mortgage borrower.

Interest Only Mortgages

Interest only mortgages are becoming increasingly popular, especially with first time buyers looking to take that first step onto the property ladder. Although having an interest only mortgage will result in lower monthly repayments, it will not however pay off any capital owed on the mortgage.

Interest only mortgages do have there place in the market and can be extremely useful in times where money is very tight or when there is an investment vehicle in place to repay the outstanding mortgage balance at the end of the term. For most borrowers however, interest only mortgages do seem to be a false economy – no headway will ever be made into reducing the balance owed.

On the whole, an interest only mortgage should only usually be adopted on a short term basis before reverting to a Capital repayment type mortgage.

New Build Enticements

Land is a precious commodity in the UK, especially in our densely populated towns and cities. In recent times, property developers have looked to seize upon every available scrap of land in order to service the need for new homes – and of course, to make a quick buck.

The need to fill these new developments as soon as they are constructed is big one – building contractors will commonly offer special deals in order to entice prospective buyers. Such methods to entice customers will include paid up stamp duty and full or partial deposit payment.

It is important to remember in many walks of life that if a deal looks too good to be true, then it usually is – builders and developers will often factor these costs into the actual price of the house or flat.

Dont Move Home On The Weekend

This is one tip that you may have heard before however it is one that is often overlooked – Dont move home on the weekend! Moving home on a Saturday remains the most popular time with people generally reluctant to take time off work. It is the busiest time to move and also the most expensive with many removal firms and van hire companies increasing their prices accordingly.

Attempting to move house on your own can mean the stress and hassle increases ten fold – although removal firms may seem to charge very high fees, moving without their help can often mean repeated trips and lots of strained muscles.

Trust Your Own Judgement

The house buying process and securing a mortgage, to many is a very daunting prospect. It is very important to stand your ground when it comes to sticking to budget – it is typical to put in an offer below the asking price to negotiate the best price, with most sellers expecting you to do so.

By the same token, if you are selling a property, it is not common for the seller to accept the first offer they receive in pursuit of the best price. Holding out for your favoured price can often pay dividends – it is often worth trusting your own judgements.

Shop Around For Insurance

More often than not is pays to shop around for insurance policies. When taking out a mortgage, it is common for the lender or mortgage broker to peddle insurance policies that they will arrange on your behalf.

For them this means extra commission! Insurance policies such as buildings and contents insurance, life assurance and mortgage payment protection insurance to name just a few. These policies can often be arranged at a cheaper premium if you are prepared to shop around for yourself!

Look Before You Leap

Taking out a mortgage with friends or a partner is becoming an increasingly popular way of buying a home. It becomes important therefore that if you do decide to take this big step, you must be confident that you are going into it with someone you know and trust.

Relationships do however turn sour at times and if this becomes the case, then sorting out your financial predicament will be an unwanted hassle – It is important to establish at the very start exactly what should happen if things go wrong and keep a record of who has contributed what. A consultation with a solicitor could prove to be worthwhile also.

Honesty Is The Best Policy

It always pays to be honest – this becomes particularly relevant in the case of arranging a mortgage or insurance policy. Dishonest or inaccurate information could leave an insurance policy worthless and dishonestly could be seen as a fraudulent offence on a mortgage application form.

Your Real Estate Business – A Facebook Secret Exposed

Getting your real estate business in front of a massive crowd can be expensive especially if you are using Google AdWords. Used incorrectly your Google AdWords campaign could be costing you $7 – $8 per click. But you do have an alternative and it’s much cheaper. Enter social media and in particular Facebook.
 
With over 350 million accounts, Facebook offers you an ever increasing audience to market your business in. On average, a Facebook user spends 21 minutes per visit on Facebook; triple the time spent on Google search.

Knowing this it’s imperitive that you start getting yourself in front of as many Facebook users as possible. The fastest way to do this is to start your own Facebook Fan Page. With over 8 million Facebook Fan pages starting daily there’s no time to waste.

Facebook Fan pages are the way of the future and here’s why:

1. A Blog On Heat

Blogs are great but their environment is a little closed. There’s no great viral effect without effective marketing. The average Facebook user has 100+ friends. When you add content via your Facebook page it appears on your friends pages as well. Once they share your information, your message goes viral.

Simply add the Facebook Connect widget to your blog and you’ll soon be giving your traffic a boost. Facebook also has a tool called Facebook Fanbox which you can also add to your blog.

So if people are logging into their Facebook account a couple of times a day they get to see your content. It’s difficult to get people logging into your blog more than once a day.

2. Getting Recommended

You know that the best sale is one that’s referred to you. Having a fan page can make this easier. Your recommendations go out to your friends and they can accept or ignore without the obligation felt via direct email. Fan pages offer a less obtrusive approach to getting recommended.

3. Don’t Market, Engage

Don’t fill your fan page with marketing hype. This is the quickest way to have people unsubcribe from you. Build a relationship first. Engage with them. On average it takes people 7 interactions before they buy from you. Keep your page social and watch your list grow.

4. The Money Is In The List

Most blogs have a capture form on their front page so the owner can build a list. Facebook Fan pages has the same feature. Now when people log into your page a few times a day, you also have the opportunity to add them to your personal email list.

Now the future of email marketing is always under the spotlight so it’s important to build your list within Facebook at the same time. A bit of a protective plan just in case email marketing goes pear shaped ove the next 10 years or so. And remember our Gen X & Y friends are not big email marketing users and prefer the instant messaging features of Facebook and other social media forums.

5. Taking it Away

Facebook fan pages also give you the option of creating time scarcity through your updates. This is not possible or less effective on blogs because of the long time delays.

But with your fan page you can create urgency by including a time countdown in your updates for an upcoming launch or display limited seating for a webinar etc.

This keeps your friends engaging with you as well as building excitement via your page.

I think you’d have to agree, having a Facebook Fan page is a great tool in building your profile using cost effective (cheap!) viral marketing.

Grab your today and stay ahead of the pack. You’ll be way ahead of the rest of the online community.

How to Set Up Your Real Estate Social Networking Plan

Jumping into the real estate social networking scene is like jumping into the middle of the ocean without GPS or a compass. Without a map, you won’t know which way to start paddling and no way to control how to get there. That is why having a Real Estate social networking plan should be a vital part of your real estate SEO strategy.
 
What kind of plan do you need? Your Real Estate social networking plan doesn’t need to be novel-length. But it should have the necessary ingredients to keep you on track to building a successful network and ultimately customers.

Here is a basic RealEstate social networking plan that you can start using today.

Determine Goals and Outcomes

Before you begin creating your plan, you need to know what you want to achieve. Are you looking to build a client base through Real Estate SEO efforts? Do you wish to network with other Real Estate professionals? Perhaps your goal is to establish your expertise in your real estate niche.

You will also need to determine where your intended audience will be. Will you be looking for networking contacts on Facebook? Are you looking to attract clients through YouTube? Or maybe get a following of Real Estate professionals on Twitter?

Set Up Your Website

If you have not already, you must get a web presence published. Your Real Estate social networking plan will have no “home base” without a website. It is best to set incorporate a blog feature in your website. Your blog and regular updates, articles, and features will be part of your pillar of expert content to where you will lead followers from social media.

Set Up Social Media Accounts

It’s time to get connected with social media communities. You should have researched which online communities will suit your Real Estate social networking goals. Set up your professional accounts. On Facebook, be sure yours is a business page where you can gather fans to follow your social media movements. Hook up to Twitter and other places that will reach your intended audience. Be sure to provide a link to your website in your profile with each account.

Get News Results

What do you have to say? It should be pertinent and timely, and be in the current interest of your intended followers. Set up Google Alerts on specific Real Estate SEO keywords. Also get your ear to the ground on social topics through WhosTalkin.com.

Engage

Each day, browse through your results and find a topic or two that is of current interest. Write a blog or an article. Post questions and links on your social media and engage conversation and response. Your Real Estate social networking depends on the quality of interest and engagement you can generate. Get involved!

Your real estate social networking plan should follow the above guidelines. Take a look at your plan and improve your Real Estate SEO through social media today.

Take advantage of the power of real estate SEO today through RealtyRanking.com’s helpful resources, services, and real estate social networking community.

Financial Analysis of the Deal: A Real Estate Investor's Most Important Skill?

Rather than just give you my analysis spreadsheets, my objective with this article is to show you how to develop your own.  It is critical that you learn how to do so if you are to succeed at real estate and I want to encourage you to begin “playing” with Excel as soon as possible.  This will be far more beneficial to you than giving a cursory glance to someone else’s work because it is easy enough to understand.  Consider this a case of teaching you how to fish and feeding you for a lifetime rather than giving you a fish and feeding you for a day.

You see, chances are my spreadsheets would not even be suitable for you because I am likely using a different investment methodology.  Even if we are both using a similar technique there could be small differences based on our respective financing or some other aspect that means it doesn’t quite fit.

But more important than any of that is this:

I have found that the greatest benefit of developing your own analysis spreadsheet is that you become intimately familiar with the numbers.  By the time you’ve developed it and used it a few times you understand the numbers inside out and upside down and have a thorough understanding of what numbers are most important and what effect certain adjustments will have.

 

You should always use your spreadsheet but the funny thing is that once you’ve gone through this process you actually don’t need it as much because you have such a thorough understanding of what numbers will work for you and your market.  What could be more valuable to a real estate investor than that sort of innate knowledge?

The PMT Function in Excel

Before we get into it you need to familiarize yourself with the PMT function and it’s variants in Excel.  PMT stands for “payment” and is a variable in a set of functions related to loans.  The variables in this set of functions are:

•PMT – payment
•PV – present value
•Rate – interest rate
•Nper – number of periods
•FV – future value
•Type – payments due at start or end of periods

One thing to be aware of is that the interest rate must be for the same time period as the payment.  So if the payments are monthly you must remember to divide the annual interest rate by 12 when you put it in this equation.

Inputs and Outputs

In designing your spreadsheet you need to think about what inputs and outputs you will need to evaluate a deal.  This needn’t be very difficult.  You can just begin listing variables down the left-hand column and you will soon figure out what other information you need as you go.  Then you can drag and drop stuff to rearrange it later.

But as a primer here is a list of things that you could include as inputs:

•Property Address
•Value
•Price
•Closing Costs (can estimate as % price)
•Percent Finance
•Down Payment
•Amount Borrowed
•Term of Loan (years)
•Number of Repayments per year (needed for PMT function)
•Loan Interest Rate
•Management Fee
•Repair Costs
•Expected Rent
•Vacancy Rate

The output we are looking for is, of course, some form of return on investment.  I’m generally looking at cash-on-cash return (CCR) which is the return on the cash that I put into the deal (not the price of the property).

CCR = net annual cash flow / cash invested
If you have a private investor you would also include an analysis of their cash-on-cash return since the deal must work for them too.

Ultimately though, you can use this spreadsheet to adjust various inputs so that you CAN meet your desired return.  In other words, if your desired CCR is 30% you can adjust various inputs to determine what price you should offer on a property in order for it to be a viable investment.

You would probably also include some other key numbers in a tidy Evaluation Report such as:

 

•down payment

•closing costs

•total investment

•monthly income

•monthly expenses

•net cashflow

But once again the numbers you display will depend upon your investing methodology.  These are more typical of a cashflow investor than a flipper.

What-if Analysis

And finally, you can use your completed spreadsheet to run various what-if analyses.  For example, what if:

•you get a higher (or lower) LVR (loan-to-value) ratio loan?

•interest rates increase?

•your investor increases the down payment?

•you charge the tenant a greater option fee?

•you change the term of the loan?
•you reduce your management fees?
•you reduce your closing costs?
You can see what I’m getting at.  Once you have a working model you are armed with some very powerful information.

The Layout
I’ve included this screen capture of one of my spreadsheets just to give you some layout ideas.  Please do not try to model your spreadsheet exactly from this one.  This is for a very specific investing methodology and many of the fields will not make sense for your siutation.

However, I just wanted to show how I divide the spreadsheet into:

•input area at the top (where yellow fields are inputs and blue fields are calculated)
•brief “Deal Evaluation” report at the bottom with some of the key outputs I mentioned earlier (for a cashflow investment)
•a “What-If” tool in the top-right corner
Possible Spreadsheet Layout
I hope I’ve given you enough information to just start playing with a spreadsheet and figure this out for your situation.  If you have specific questions or difficulties just come back here and use the comment field below.  Either I or one of your fellow readers should be able to help you out.

Real Estate Investing Vs. The Stock Market – A good analysis

Today’s investment markets offer investors a wide variety of options. One of the most rewarding opportunities is real estate investing, which can produce a very good income stream. If you choose to become a real estate investor, you will enjoy several benefits not associated with other types of investment.

First of all, investing in real estate has the enormous benefit of financial leverage.  Even if you borrow the money for your real estate investing from a bank you can often get into a deal with a 10% down payment which means your returns are instantly magnified due to the fact that you are earning on the bank’s 90% contribution as well.  As an example, let’s assume you have $10,000 to invest and you get 10% return on your investment regardless of the vehicle.  If you put it into the stock market you will buy $10,000 worth of shares and after 12 months your investment is worth $11,000.  If you put that same money into real estate with a 90% loan you earn 10% on the full $100,000 investment and finish with $110,000.

 

So your $10,000 has been doubled in the real estate investment above whereas it only produced an extra $1,000 in the stock market.  Why?  Because your lender’s money has been working for you too.  This is the power of leverage and is one of the biggest advantages of real estate investing.  And yet there are even more reasons to become a real estate investor as you will see.

Another incredible reason to begin investing in real estate is the tax benefits. One of the best tax breaks of real estate investing is the REQUIRED depreciation by the IRS on the property.  This represents a “paper loss” when in most cases the property (including the land) is actually appreciating.  So in essence you pay taxes on a reported profit figure that is significantly lower than your actual earnings – very nice.

 

Perhaps an even better tax benefit is the 1031 exchange as defined by section 1031 of the Internal Revenue Code.  Essentially this allows investors to delay paying any capital gains taxes when a property is sold as long as the proceeds are reinvested in an appropriate property.  The government is basically encouraging investors to stay in the market with this fantastic incentive.

One final benefit of investing in real estate worth mentioning here is the flexibility of sale contracts.  Unlike the stock market you can get very creative with your offers.  You can exchange virtually anything for a property instead of cash which can mean greater returns and some spectacular win-win arrangements.