Investing 
40
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Realtors Want You to Time the Market!

This is a guest post from Ramit Sethi, the founder of iwillteachyoutoberich.com. His new book, I Will Teach You To Be Rich, will be published on March 23rd.

A few weeks ago, I got an email from a reader named Dave:

A few months back I was looking to buy a home in Houston. During my search I decided to look at this builder because of the “incentives” they were offering. Well, I soon found out that these “incentives” were nothing more than a bait and switch tactic.

Anyhow, a couple of days ago out of the blue I received the e-mail below, and couldn’t believe what I was reading. With all of the unfavorable economic conditions we’re facing, home builders continue to send out this garbage.


(Click to continue reading…)


 The Home 
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RealtyTrac Review: Service For Vultures

Cute BabyWhen it comes to making money, I’m all for capitalism. I like a free market and you can try to make money from as many means as possible. However, do you really need to be a vulture and swoop in on a foreclosure? There may or may not be a family living in that house but if you wanted to make money, do you want to use a service that preys on the misfortune of others?

There are plenty of places you can go to make a buck, you don’t have to tempt fate by making a couple bucks off someone you have to kick out of their home. (yeah, they made mistakes, but do you want to be the person who puts the nail in the coffin… just for an extra dollar?)

In all honesty, RealtyTrac doesn’t prey on the downtrodden… but they let other people pick at the bones of the dead. Is that worse? I think so, but that’s up to you.


 Personal Finance 
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190 Bowery: Don’t Judge A Book By Its Cover

190 Bowery - Home of Jay Maisel

On the outside, it looks like graffiti-covered dump.

On the inside, 190 Bowery in Manhattan is a six-story, 72-room, 35,000 square foot single family home that is absolutely gorgeous. It was once the home of Germania Bank and was built in 1898.

Jay Maisel, a well-known photographer, bought the building forty-two years ago for $102,000 and has lived in it since with his wife Linda and daughter Amanda. When he got it, it “was knee-deep in garbage and coated in soot.” He said his parents cried when they found out and that “Every single thing that can come out of a human body has been left on my doorstep. But it was more disgusting than dangerous.”

The slideshow is a collection of eleven beautiful photographs covering every floor of the building. The home is estimated to be worth at least $30 million. There are more photos in this interview with Jay Maisel (interview).

The 72-Room Bohemian Dream House [New York Magazine] (hat tip to Kottke.org)


 The Home 
9
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If Not A Contract, At Least An Understanding

Real Estate AgreementI have two friends who bought a half-million dollar rowhome in Baltimore, MD without a contract.

That’s right, they entered into a business transaction for a half million dollar asset with no contract, no agreement (more on this later), no nothing. Half a million bucks.

They did have what they considered an agreement and it was that they agreed to discuss what they would do with the home in three years. For three years, neither one could move out the agreement was to keep status quo for three years. It’s now three years later and one of their two roommates is moving out… and they’re not sure what they’re going to do. One guy likes the status quo and wants to get another roommate. The other doesn’t want to deal with the headache of another roommate and would prefer to eat the rent difference.

(Click to continue reading…)


 The Home 
11
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Double Check Your For Sale Listing Details

Home For SaleA little over two years ago, my friend discovered that she had developed mold in her basement. It was a strain so difficult to manage that it required thousands of dollars to eradicate and she developed medical problems because of it. She had it professionally cleaned and had a ultra-violet light-equipped HVAC system installed to combat future growths. Despite all her improvements (and spore-free test results), her medical issues persisted and she was forced to move out and try to sell her home.

When I looked at the description used to explain the comforts of her home, I was aghast. The description, couched in all sorts of non-specific novelette-type prose like “quaint neighborhood” and “lovingly renovated,” did nothing to describe any non-mold related improvements. While a bit shady, I could understand not mentioning the mold related enhancements such as the UV HVAC system or the extensive cleaning of the basement; but the listing completely skipped how she replaced all her appliances with stainless steel, replaced her counter-top, and installed hardwood floors on the first floor. It even skipped on describing the renovated bathroom on the first floor.

My logic for offering as much information as possible so that buyers can make an informed decision on whether they want to tour a place stems from my experience with buying pay per click advertising. The key in any type of advertising is to lower your cost of acquisition. The cost in this case is your time. What you want is someone who is genuinely interested in your home coming to get a tour. If someone absolutely hates stainless steel appliances and doesn’t know you have them, they might be turned off the minute they walk in. You’ve just spent time showing a place with zero chance of a sale and time away from showing it to someone who would buy it.

On the other hand, if they don’t care about hardwood floors and they come, they might be pleasantly surprised but they won’t value it as much. You want the person who values hardwoods to visit because you will be paid more if that person buys. That person is more likely to answer the listing if they see hardwoods in the description. Offering as much information as possible might limit your pool potential of buyers but the probability one of them buys will increase (in pay per click advertising, you want a lot of targeted clicks, not just a lot of clicks).

I told my friend this but she was reluctant to ask the real estate agent to change the listing because she felt the agent knew best. While I have no doubt that a listing agent knows more than I do about selling homes, I find it difficult to believe that you would avoid mentioning stainless steel appliances, hardwood floors, or a newly renovated bathroom.

Ultimately my friend was unable to sell the home and is now happily renting it out. (this is more a product of the softening real estate market and the agent having too many listings to manage at the time)

Often, experts do know more than you in their domain but it never hurts to make suggestions. When you’re talking about such valuable assets and when the cost of asking is zero, it makes no sense not to ask.

(Photo: thetruthabout)


 The Home 
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2007 Remodeling Best Home Renovations List

Kivitokki MansionEach year, Remodeling Magazine works hard to produce a Cost vs. Value Report in which they give you a good idea of the best home renovations from the perspective of resale value. In other words, if you had $10,000 to spend on a remodeling project and wanted the best financial return for your dollar, this list would give you a good idea of where you should spend it.

Remodeling takes it one step further and gives you the ROI based also on your geographic area because different areas enjoy different trends, styles, and comforts. The best example has to be a pool. A pool’s value is significantly higher in temperate climates like the Mid-Atlantic and South Atlantic and less valuable in areas that are cooler like the New England states. For the sake of simplicity, I’ll just compare national figures because that’s what they used to do in their surveys.

It’s amazing what happens in one year.

(Click to continue reading…)


 Investing 
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Guide to Real Estate Investing: REITs & Tax Liens

This is the final installment to the Trisha Allen’s Guide to Real Estate Investing.

As a reference, the Active/Passive measure is a five star scale with one-star being the most active and five-stars being the most passive.

Real Estate Investment Trusts (REIT’s)

A Real Estate Investment Trust is an entity that invests in real estate–usually large commercial cashflowing rentals. When you invest in a REIT, you’re not buying real estate—you’re buying stock in a company (a trust, actually) that buys and manages real estate. Typically, you’ll receive dividends. But, dividends from REIT’s are taxed at ordinary income tax rates, unlike stock dividends. So, REIT’s may not be a great choice for people in higher tax brackets.
Entrance Difficulty Level: Easy
Active/Passive: ****

Tax Lien Certificates

Tax liens are imposed on properties when property taxes go unpaid for an extended amount of time. And, until the overdue taxes, accrued interest, and fees are paid to the local government, the tax lien will stay with the property. Anyone purchasing the property will be subject to the lien. In many states, private investors can purchase the liens themselves as tax lien certificates—which then transfers the government’s interest and rights over the property to the investor! The rules vary from state to state. But, in some states, when you purchase a tax lien certificate, you receive the right to collect the interest on the unpaid taxes. The interest rates can range from 8% to 50% per year, depending on the state. Also, depending on the state, if the taxes go unpaid for long enough, the tax lien certificate purchaser can either sell the property or the property will be auctioned off for them to collect the total amount of interest and fees.
Entrance Difficulty Level: Easy
Active/Passive: ***

Note: I did not include a category regarding purchasing property in hopes of capitalizing on future appreciation. In my mind, that’s not investing—it’s gambling! If the property doesn’t cashflow well or can’t be sold for more money than was put into it, a buyer is taking a HUGE risk that could result in selling at a significant loss or losing the property to foreclosure.

An educated, careful investor has no reason to be afraid of investing in real estate. With an education behind you, you’ll be able to spot opportunities as they come along—sometimes when no one else can! Much of the knowledge you’ll need can be found for free by investigating online resources like blogs, forums, and even reading books from the library or while sitting in the café at your local bookstore. Now, don’t just read one motivational book and think you’re ready! Take the time to get to know your target market, cover your bases, and you should do just fine.

Trisha AllenI’ve done real estate investing successfully since 2003 and have blogged about it since 2005. A word to the wise: before you invest, check with an attorney and a CPA to evaluate your goals, investing options, and the laws in your state.


 Investing 
2
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Guide to Real Estate Investing: Buy & Sell

This is the third edition to the Trisha Allen’s Guide to Real Estate Investing, written by Trisha Allen of Building an Empire.

As a reference, the Active/Passive measure is a five star scale with one-star being the most active and five-stars being the most passive.

Buy-And-Sell Investments

Commonly known as “flipping” or “resaling”, purchasing a residential or commercial property to sell for profit can be very lucrative for you or absolutely disastrous! You can perform every type of inspection known to man but still not be able to anticipate every “gotcha” that comes your way! With real estate markets plummeting in certain areas of the country, flipping has become a risky business indeed. The idea behind this type of investing is to benefit from the profit made by selling a property for more than you paid for it, plus any expenses you incurred during your ownership. Land can be flipped for a profit as well.

Fix-And-Flips - After purchasing a property for the right amount at the right time, performing the right fixes for the right amounts, and selling at the right price at the right time, an investor can make a killing! (That’s a lot of right’s that could go wrong!) Fix-And-Flips take a lot of know-how, money for repairs and upgrades, intimate familiarity with the local real estate market, good project management skills, and a little dash of luck to boot. There’s nothing passive about this type of investing, either. Don’t be fooled into thinking that you can hire a contractor and trust him or her to get the job done right, on budget, and on time! But, with greater risk, comes greater rewards…maybe.
Entrance Difficulty Level: Difficult
Active/Passive: *

Wholesaling – Frequently an entry point for beginner investors, wholesaling involves purchasing a property or putting it under contract at a discounted price while the wholesaler locates a buyer to purchase it from them for a higher price. The property is flipped immediately after purchase—without any upgrades being performed–or possibly before the closing even occurs! The wholesaler can accomplish this by either holding a double closing (which is when two closings happen back-to-back from seller to buyer, then from the first buyer to the next buyer) or by assigning their position on the contract to the next buyer for a fee. The biggest risks for wholesalers is being stuck with a property they cannot sell for a profit, or losing their earnest money if they cannot locate a buyer and decide not to close on the property at all.
Entrance Difficulty Level: Easy
Active/Passive: *

Final Edition: REITs & Tax Liens

Trisha AllenI’ve done real estate investing successfully since 2003 and have blogged about it since 2005. A word to the wise: before you invest, check with an attorney and a CPA to evaluate your goals, investing options, and the laws in your state. You can read more about my own experiences at TrishaAllen.com.


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