Friday, October 17, 2014

How Millennials Can Make Millions in Real Estate

Roughly 95 million Americans belong to the Millennial Generation, the classification for those born between the early 1980s and 2000. Many members of this group have reached the age where, historically, they would purchase their first home, but those 25 to 34 are accounting for fewer home purchases. Although Millennials may be suspicious of the real estate market after the recession, investing in the market is something that could help them grow their wealth and buy their own home sooner.

In his article, My Advice to Millennials: 4 Steps to Becoming a Real Estate Millionaire, Ethan Roberts, a real estate writer, editor and contributor for Auction.com whose work has been featured on Money.msn.com and Reuters.com, provides tips to help Millennials enter the market and grow their wealth.

Getting Off the Debt Merry-Go-Round
Given the amount of debt that many Millennials are already facing due to student loans, being cautious when it comes to accruing more debt is important to gaining and maintaining the credit score of 700 or above necessary to get better loan rates. As a real estate investor since 1995, Roberts suggests avoiding the purchase of items that depreciate, especially brand-new cars telling Millennials to “research the most dependable older cars, such as the Honda Accord. For $6,000 - $8,000, it will probably last you nearly as long as the new car for which you’ll pay $20,000 or more.”

Save for More Than Just a Rainy Day
While Millennials are less interested in spending on luxury goods and applications and more interested in buying natural products, organic food and fresh fruits and vegetables, they still spend a significant amount of money on vices such as alcohol, fast food from McDonald’s and caffeinated drinks from Starbuck’s according to data recently compiled by the budgeting app Level Money.

Saving will involve some sacrifices and those vices can be the first to go. “Skip the $5 Starbucks latte and buy your coffee from the convenience store,” says Roberts. “Take a bagged lunch to work, rather than dropping $8 or $10 every day at the local cafe. Forego the clubbing on Saturday night for a fun evening at home with friends or your significant other.”

Roberts suggests that the best way for Millennials to save is to pay themselves 15 to 20 percent first and then assign the rest of their paycheck to bills and finally to pleasure.

Depositing a Down Payment
“If you’ve been in the military, take out a zero-down VA loan. Otherwise, take out an FHA loan with 3.5 percent down, or a conventional loan with 5 percent down,” Roberts says. “Look for a foreclosure or short sale that has some start-up equity in it. Fix it up as best you can (you may have to forego saving in order to do this), and live in the house for no more than a year or two. What’s that, you’re not handy? YouTube has great videos on how to fix almost anything for which you don’t need a contractor (in other words, everything except a roof or electrical system). After your rehab, sell the house and use the profits to finance your next home, again looking for a distressed property with equity.

An alternative: Live in the home until it’s rehabbed, and then rent it and buy another primary residence. This is a bit more difficult because you have to save money while making repairs and may really involve some sacrifices.”

Flip, Rent, Repeat
Continuing to flip or rent a home can help Millienials increase their net worth while allowing them to purchase a home and provide them with an additional stream of income. “By continually flipping or renting the homes you live in, your net worth will probably hit the $1 million dollar mark within another 10–15 years, while everyone else you knew at age 25 is still plodding along with little to nothing in the bank. With some perseverance, you may even have these properties paid off while you’re still in your 40s and have a great income stream coming in every month.”

Do you know a Millennial who could use some advice to help them become a homeowner or real estate investor?

Portions of this article have been republished for additional educational purposes. This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace.

Thursday, October 16, 2014

4 Tricks to Be a Fearless Seller This Fall

This New Jersey home listed on ForSaleByOwner.com
 is ready for a fall sale.
Are you afraid that you missed out on the summer selling season? Autumn is a great time to scare up leads from buyers who are looking to take advantage of lower mortgage rates and want to find a home before the holidays. So don't despair, these simple tips can help you become a fearless home seller this fall.

1. Avoid Scary Staging Mistakes
A home that hasn't been properly staged can send house hunters running for the hills. Filling your garage with items you are unsure what to do with or ignoring unpleasant odors are common missteps that sellers can make along the way. By correcting these mistakes with five expert staging tips you can create captivating photos and showings that can help you attract home buyers instead of scaring them away.

2. Make Your Home a Happy Haunt
Creating an atmosphere that is enchanting to potential buyers is crucial as the days become shorter and the nights grow colder. With polls showing that fall is the favorite season of Americans, using color palettes consistent with the season for your home is just one of several great DIY decorating tips for fall to create an atmosphere that is welcoming to all visitors.

3. Treat Buyers to Great Photos
Listings on ForSaleByOwner.com with six or more photos receive three times more inquiries from buyers, which is why you will want to make sure you take photos that bring your home to life. Start by making an outline of the pictures you want to include beginning with exterior shots and moving inside to include the photos every house hunter wants to see.

4. Don't Dread the MLS
Not sure about what the Multiple Listing Service is, or how to get your home advertised there? Four out of five buyers find their homes on this local resource, making it critical for you to decide if MLS listing will help sell your home.

If what you fear the most about your home sale is losing money due to agent commission, sell your home by owner. You can save thousands and maximize your reach for a fraction of the fees.

Wednesday, October 8, 2014

Mixed Signals in Foreclosure Numbers Are No Cause for Alarm

How can an increase in foreclosure activity be a positive sign for the housing market? Rick Sharga, Executive Vice President of Auction.com, has evaluated the monthly growth of foreclosure starts and real estate owned actions to show why these numbers are not a cause for concern. With over 30 years of experience in real estate, mortgage and technology marketing, Sharga is one of the country's most frequently-quoted sources on real estate, mortgage and foreclosure trends and has appeared on the CBS Evening News, NBC Nightly News, CNN, ABC World News, CNBC, FOX and NPR.

So, what should we make of the recent reports that show a month-over-month increase in foreclosure starts and REO actions, but also show year-over-year declines in both of those categories on a national basis?

That scenario is probably going to become “the new normal,” as the judicial foreclosure states finally begin to process delinquent loans that should have been in foreclosure two or three years ago, but were delayed by regulatory and legislative measures. In fact, a high percentage of foreclosure starts – probably 50% or more – are very likely on loans that were issued in 2009 or earlier, and where the borrower hasn’t made a payment in at least two years. Some of the foreclosure starts also represent loans that were defaulted on, modified, and now have been defaulted on again.

We may have a few months where foreclosure starts and/or REO actions increase on a year-over-year basis as well, but this is simply a product of how quickly some of the judicial foreclosure states are able to process overdue foreclosures, not an indication of any new wave of problem loans.

In fact, loans issued over the past three years are defaulting at half the historic default rates. The combination of much lower loan volume and much lower default rates means that when the industry finally works through the last of the backlog, the pipeline will dry up almost instantly. Most people I’ve spoken with about this believe that the backlog should be largely exhausted in the next two years, although a few states with extraordinarily long foreclosure cycles like New York, New Jersey and Florida may take a little longer to clear.

One of the interesting aspects of what’s happening is that we’re seeing increased levels of foreclosure sales. This is happening for a number of reasons.

First, legislative and regulatory actions, mostly in judicial states, have created an enormous backlog of extremely delinquent loans that should have been foreclosed on several years ago. These properties are finally working their way through the process and going to auction. This is probably the biggest and most obvious reason for the increase. Auction.com has actually picked up business in about 18 judicial states over the past year, even though we can’t cry those auctions due to statutory regulations.

Second, the number of foreclosure auctions has been artificially low since the peak of the crisis. Historically, less than half of the loans that enter foreclosure go to auction. Of those, about half are sold to investors, with the other half going back to the lender. During the worst part of the crisis, a much higher percentage of defaulted loans went to auction, but virtually none of them were sold – almost all of them went back to the lenders. That’s why REO numbers spiked the way they did.

As home prices have rebounded, especially in the hardest-hit states, lenders have been able to recoup a higher percentage of their losses at the foreclosure sales, so they’re sending more properties to auction, and pricing them to sell. During the crisis, they often priced them at the full amount of debt, and investors had no interest in over-paying for these properties. Activity from institutional investors, which has accelerated price appreciation and increased sales volume, has also been an incentive for lenders to move properties.

Finally (and I suspect not everyone will agree with me on this), I believe that foreclosure auctions are, at least to some extent, replacing short sales as a means of property disposition. Short sale volume has dropped off significantly, and will continue to drop for the next 2-3 years before settling back to pre-crisis levels. Foreclosure auction sales will pick up some of this slack.

The bottom line is that we can expect some volatility in foreclosure activity over the next year or two, but that the numbers will continue to head back towards normal, even though foreclosure auctions will probably continue to increase for the rest of this year, and possibly through 2015 as well.

This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace. 



Monday, October 6, 2014

5 Most Popular Homes For Sale By Owner in September

The most popular properties on our website for the month of September are a diverse group that offer everything from modern updates and amenities to acres of land. All five homeowners prepared their home for sale with updates and improvements before listing. In fact, one of these homes is already under contract.

1. 206 N Quaker Ln, Alexandria, VA 22304
Price: $1,199,000
Highlights: This open concept 5-bed, 4.5-bath is located on a private lane that is only shared with six other houses making it quiet and secluded, but that doesn't mean that it is lacking in any amenities. A fully fenced-fenced yard with a remote-operated gate, updated kitchens and baths and a finished basement are just a few of the selling points for this 4,100 square foot home. Buyers with children will find lots to love about this Cape Cod house such as it's proximity to the top-rated Douglas MacArthur Elementary School and the huge Rainbow jungle gym included.

2. 3441 Hadley Road, Hadley, PA 16130
Price: $169,000
Highlights: Located on 2.3 acres, this 4-bedroom split-level was built by the seller in 1962, which means that all updates and repairs since the original construction were under one owner. Amenities include oak hardwood floors in each bedroom, a front porch, rear patio and a brick fireplace. The home also features triple-therma-pane sun/ultraviolet protection windows, oak trim and doors, and new shingles were installed in 2010. A separate building is located on the property and can be used for a garage, workshop or RV storage. The seller is including the appliances with the sale and is willing to negotiate.

3. 15355 S. Moonlight Road, Olathe, KS 66061
Price: $550,000
Highlights: With a lot size of almost 20 acres, this all electric home was built in 1996 and has seen significant updates in the last five years including a new AC/Heater, roof, hot water tank and toilets. The 3-bed, 2.5-bath home also features 2,559 square feet of living space with new carpeting installed in every room in 2008 and a complete master bathroom renovation to include Euro glass doors and 2 shower heads. Property features include a custom 18 x 40 foot in ground salt water pool with underwater LED color changing digital lights, professionally installed Nile outdoor speakers and 6-acre wooded area.

4. 1043 Hill Road SW, Willmar, MN 56201
Price: $169,000
Highlights: A 3-bed, 3-bath cottage style house located in the middle of a quiet cul-de-sac, 1043 Hill Road is within walking distance to five parks and within close proximity to a number of schools, restaurants and shopping. The home is move-in ready with a finished and insulated attic storage loft (currently being used by the seller as a yoga and exercise room), a newly renovated basement, new water heater, an open concept remodeled kitchen and optional appliances replaced in 2013 and 2014. The private, gated backyard features mature trees and recently planted apple trees.

5. 254 Franklin St, Mountain View, CA 94041
Price: $1,093,000
Highlights: This 3-bedroom, 1-bathroom home in Mountain View is currently under contract. Built in 1920 the house itself features 1,086 square feet of living space while the lot itself consists of a large fenced yard with lots of mature trees on 0.17 acres (equivalent to about 7,500 square feet). The property is secluded while also very close to the downtown area, making it an excellent location for those interested in privacy while still maintaining access to shopping and restaurants.

Wednesday, October 1, 2014

How to Maximize Your Returns on Rental Properties

Ethan Roberts is a real estate writer, editor and investor. He’s a frequent contributor to InvestorPlace.com, and his work has been featured on Money.msn.com and Reuters.com. He’s also written for SeekingAlpha.com and MarketGreenhouse.com, and was one of five contributing editors to TheTycoonReport.com. He’s been investing in real estate since 1995 and has been a Realtor since 1998. He also teaches classes on investing in residential real estate.

Investing in long-term rental properties can be quite lucrative, if and when it’s done correctly. However, just as with all investments, there are some risks, and not everyone who invests in rental properties has good experiences. I’ve been a successful landlord of single-family rental homes for 18 years, and during that time I’ve seen more than a few landlords quit because they were either losing money or just barely breaking even.

That’s a shame, because the landlording business should be highly profitable under normal circumstances. So what went wrong for the investors who didn’t succeed? They made some common mistakes, which I’ll describe in a moment. First, let’s talk about a key way to measure success: return on investment (ROI).

Determining ROI
For me, successful landlording is all about maximizing my ROI. Simply defined, ROI measures the efficiency of an investment. It’s calculated by dividing the return you realize from the investment by its cost. The result is expressed as a percentage. Here’s the formula:

(Gain from investment − Cost of investment) ÷ Cost of investment = ROI

For example, say you buy a house with cash for $120,000. You spend another $10,000 on repairs and improvements. Your total investment cost is $130,000. You rent the house for $1,400 a month, or $16,800 gross annually, and have no more repairs over the following year.

Your gross ROI would be: $16,800 ÷ $130,000 = 12.9%. You can also figure out the net ROI by subtracting any additional costs, like insurance and taxes, from the gross rent. Many of my properties have double-digit gross annual returns, and yours should too.

Mistakes that Lower ROI
But maximizing ROI isn’t just about buying a house and collecting rent. You might experience a number of variables throughout the year that will increase or decrease your ROI. For example, landlords can increase ROI by charging a one-time pet fee of $300 or charging a late rent fee of $10 per day. Tenants can decrease ROI by not paying their rent, moving out prematurely, or damaging your property.

Here are the top ROI-lowering mistakes I see landlords make:

1. They aren’t selective enough in their choice of tenants.
Expenses like non-payment of rent or premature move-outs are often the results of landlords not being picky enough about who they rent to. You must always choose tenants carefully, and run credit reports and background checks by contacting their previous landlords and workplace. It doesn’t hurt to run a criminal check, either.

2. They don’t treat their investment properties like a business.
Some landlords choose the first tenant that comes along, regardless of their background, and then get stuck with a costly situation. Conversely, some landlords feel that if they know someone, that person will make a better tenant, so they allow relatives, friends, or colleagues to rent from them. But then if the tenant has difficulty paying rent, the landlord is unable to be firm and assertive with them. This is a classic failure to treat one’s real estate investments like a business, and it can crush your ROI.

3. They let small repairs linger until they become more costly.
Still another mistake that landlords make is being cheap about fixing problems in the house right away. Sure, it detracts from your ROI every time you have to make a repair, but it’s always less expensive to correct a minor problem before it becomes a major one. Think of a roof leak that begins with a small stain or drip. At the onset, it doesn’t cost much to fix. But let that roof leak go for a year and see what kind of repair bill you’ll amass.

4. They aren’t selective about the properties they purchase.
Being selective about investment properties will also help your ROI. I only purchase homes that were built after 1978, so I don’t have to deal with lead-based paint issues, galvanized steel pipes, settlement, and other costly problems of older homes. I also favor homes of less than 2,000 square feet, because homes larger than that become much more costly to maintain.

5. They buy homes in run-down neighborhoods.
I avoid homes in run-down neighborhoods because the tenants are often transient, which can increase the chance that they’ll move out prematurely, pay the rent late or miss rent payments altogether. In addition, homes in these neighborhoods sometimes incur additional costs from theft or vandalism to the property. These kinds of costs can crush your bottom line.

6. They buy at the peak of the real estate market.
It’s a good idea to avoid buying homes near the peak of the real estate market. But how do you know when the peak is at hand? A few indicators that I’ve seen are: the homes become quite expensive in comparison to previous prices; rental ROI drops into single digits; and landlords carrying a mortgage have either a negative or flat cash flow.

If you avoid making these mistakes and follow my suggestions, you should find that you’ll have much more success as a landlord, and a much higher ROI at the end of the year. And those higher annual returns really add up over the years to help you build long-lasting wealth from your real estate portfolio.

This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace. Founded in 2008, the company has sold nearly $20 billion in assets since 2010. 

Tuesday, September 30, 2014

Home Seller Sweepstakes Winner Profile: Diane and Larry Wermers

This summer, ForSaleByOwner.com held its inaugural Home Seller Sweepstakes, a promotion celebrating successful by-owner home sellers. Three lucky winners were each awarded 6 percent of their home sale price the equivalent of what they saved by not having to pay a real estate agent's commission. Here we profile our July Home Seller Sweepstakes winners, Diane and Larry Wermers of Rapid City, South Dakota.

Diane and Larry Wermers are no strangers to DIY real estate sales; in fact, of the six homes they've sold over the years, two have been by-owner transactions. As Larry puts it, "We've paid more than $100,000 to real estate agents, and we were fed up with it."

Diane explains: "The last property we sold was on a lake in a resort area. We listed it with three different real estate agents and had no response. That was when we decided to do it on our own."

For their most recent home sale, a ranch home in Rapid City, South Dakota (pictured above), the Wermers found ForSaleByOwner.com through various online real estate searches. "The site would come up as I was searching the Internet for homes to buy over the years," Larry says. "We liked the fact that potential buyers would also be able to find our home on ForSaleByOwner.com." The couple even went one step further: They placed an ad in their regional newspaper highlighting their ForSaleByOwner.com listing ID.

Because of their background selling various properties, the Wermers felt comfortable with the process and the professionals they've worked with. "We have a personal relationship with our local title company, which we've used for each of our home sales," Diane says. They advise other by-owner sellers to also assemble a solid team of pros. "Find a good lender who is willing to work with individuals," Larry says. "Often lenders would rather work directly with sellers and buyers than with real estate agents who can sometimes get too involved, so to speak." Diane also recommends seeking the services of a trusted attorney to handle paperwork and other legal questions.

Diane admits that she ignored ForSaleByOwner.com's Home Seller Sweepstakes at first. "The second time I saw it, I figured, why not enter," she says. The couple was also hesitant when they found out they had actually won. "I couldn't believe it," says Larry. "I thought it was a scam!" Their winnings will go toward a nest egg for their new home. "And adding to our savings would be nice, too," Diane mentions.

Their win continues somewhat of a lucky streak for the Wermers. Back in 1989, Larry won a pickup truck through a contest at work. "I then sold the truck and bought a house," he says with a chuckle.