Author Archives: theremadacompany

Three must-have qualities of a good real estate investment

Investing in real estate can be daunting, and some people find it difficult to choose the right property to invest in. There are many factors to consider when investing in real estate and below are three sure-fire ways to recognize a good real estate deal:

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It has a positive cash-on-cash return

Cash-on-cash return is the percentage of the before-tax income to the total cash investment (usually the down payment). When purchasing real estate, one should consider the cash-on-cash return of the investment. Using a simple formula (before-tax income divided by the total cash investment), the investor can determine if the cash-on-cash return for the property is positive or negative. Experts suggest that investors should avoid high-value properties (such as flashy condo units or expensive beach houses) because they tend to yield negative cash-on-cash returns.

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It has to be a low-risk investment

Real estate is a risky business but with the right papers and due diligence, it’s possible to lower the danger of losing money on real estate. It’s important to be smart about where and what investment to make to avoid scams or bust properties.

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It doesn’t take too much time or management

When buying real estate, investors should consider how much time and money they would invest in the long term. Expensive properties sometimes take too much effort to maintain compared to moderately priced residence or commercial properties.

Read more about real estate investments and other related articles from this The Remada Company blog.

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REPOST: The Good, Bad and Ugly of Real Estate Investments

Are investments in real estate good or bad? Lou Carlozo of US News explains the positive and negative sides of investing in the real estate sector for people who want to enter the industry.

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Knowing the market can give investors an advantage. | Image Source: usnews.com

While many investors get a rise when it comes to the potential profits in real estate, that doesn’t mean all properties rise enough in value to justify the commitment.

“Some people buy real estate expecting it to appreciate a lot over time,” says David Reiss, a professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School. “But it can be risky – or even foolish – to pay so much for a property that you’re losing money on an operating basis just because you think it will appreciate.”

The wisdom in real estate, then, applies just as it would with stocks, commodities or any other investment class: The variables are many, the can’t-miss propositions few. So where should the savvy money go? And how does real estate fit into your overall portfolio?

Here, experts and observers weigh in on the essentials that should guide your decisions, as well as the ways to guide your financial forays toward success.

Know your market well. If you pay market price for an investment property, you probably won’t see particularly robust returns. “It will make a market return, and if you want to do better than that, you have to pound the pavement,” Reiss says. “Look for deals that are underpriced for one reason or another. And you won’t know which deals are underpriced unless you have a good sense of how properties are priced.”

Luxury homes may hold a key. In 2014, the S&P/Case-Shiller National Home Price Index for single-family dwellings rose roughly 4.5 percent. But Frank Symons, executive vice president and chief operating officer for the western region of Sotheby’s International Realty, reports that luxury homes appreciated 8 percent that same year. He cites Sotheby’s Global Luxury Residential Real Estate Report for 2015. “This is a healthy return on investment at a time when residential real estate is still recovering,” Symons notes. “As recovery continues, the rate of appreciation could gain momentum.”

Turnkey properties can unlock returns. With a turnkey investment, you’re buying a fully vetted, redeveloped property with tenants and a property manager. “It’s a lot like buying a take-and-bake pizza. All the ingredients are there, and all you have to do is buy,” says Scarlett Tassone, a vice president and mortgage banker with PrivatePlus Mortgage in Atlanta. The downside is that compared with other tenant properties, “they are not quite as lucrative and a bit more expensive,” she says.

Vacate vacation homes. Just because you can kick back at a recreational abode doesn’t mean profits will recreate themselves. “Vacation homes are nothing more than a whimsical retreat and a low-tier income option,” says Kurt Westfield, managing director of WC Equity Group, based in Tampa, Florida. “Seasonally, they do have the capacity to generate decent returns, but the vacancy and holding costs coupled with typically premium pricing tend to equate to a less-than-stellar rate of return.”

Give REITs a chance. A real estate investment trust is a company that owns, develops and redevelops real estate assets. “Publicly traded REITs and REIT funds offer liquidity and low investment minimums,” says Mike Papierski, national real estate practice leader at Northern Trust Company, based in Chicago. REIT mutual funds in particular offer high diversity. Just be aware that “performance tends to more closely align with stock market return and may not correlate with actual property values,” Papierski says. Overall, he recommends a 15 percent cap on real estate exposure in a portfolio.

Caveat rental. Yes, you can make money with rental properties. But if you have little experience in the game, expect a steep learning curve. “Bricks-and-mortar properties require expertise and intensive management, even with investment-grade properties,” Papierski says. “If the owner doesn’t have the expertise, he or she will need to hire someone to handle the leasing and day-to-day management.” And that fee generally runs between 4 and 8 percent of gross rents.

You might flip for flipping houses. In this form of investment, the goal is to get in short-term and sell properties at a markup. And while many investors make money this way, much depends on the neighborhood you buy and sell in, as well as hidden costs associated with renovating the property that can decrease its net return. “This type of real estate investment has more risk than owning rental properties,” says Rebecca Pavese, financial planner and portfolio manager with Palisades Hudson Financial Group in Atlanta.

Vacant property is a mixed lot. Vacant properties may hold tremendous potential in a neighborhood that’s gentrifying, or if the land sits in the path of a proposed water and sewage line. But investors will pay on both the buying and selling end. “As a development play, these have huge one-time upside,” Westfield says. “But the capital gains tend to be a hindrance. Personally, I avoid it.”

Increase your profit potential with an investment of time. Property development, management and administration often require an army of specialists. But if you’re adept at repairs, accounting or showing a vacancy to prospective renters, you can forego the fees associated with hired help. “Depending on your availability and your skills, these could be trade-offs that are worth making for you,” Reiss says.

It’s not just what you’re renting, but who’s renting. Veteran Atlanta Realtor William J. Golden, who works with RE/MAX Metro Atlanta Cityside, tells how his onetime rental home became a house of horrors. One tenant painted an entire room black; another housed a stolen motorcycle at the property. And when Mr. Motorcycle wasn’t swiping mail from wealthy locals, he allowed his buddies to squat there. Lesson learned? Vet your renters thoroughly and check on them frequently. “I swear that house was cursed,” Golden says. “Interestingly, we’d purchased the home from a psychic, so I wish she could have given us a heads up what was in store.”

Follow this The Remada Company Twitter account for more updates on the real estate sector.

Spring-time for home buying: What to expect

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Spring-time for home buying applies to different months of the year, depending on the location. Typically, though, it covers April, May, and June, because many Americans take vacations from July to August. For most parts of the country, April is usually the busiest month for home buying.

This home buying season is the first one in a while that has the housing market clearly in recovery. Previously, there were lingering uncertainties on home price increases, but this year sees the first season where most people are expecting home prices to rise.

With expectations of prices to increase even more, buyers have been impatient. Meanwhile, property owners are waiting for peak prices before they decide to put their houses on the market. Because of this, inventory in some parts of the country is spare and prices have been pushed further up.

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Meanwhile, the worst of the foreclosure crisis is a thing of the past for most parts of the country and the shadow inventory has shrunk. This means that the market has shifted from distressed sales to conventional sales.

Another factor that has a significant effect on the activity during the spring home buying season is the Rent vs. Buy Index. With the latest data, it is still cheaper to buy than rent these days, even though home prices are still rising. While there are fewer sure bargains to be found in the current housing market, buying is still considered more practical.

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Real estate investor Steve Liefschultz is the chairman of the board of The Remada Company in Minnesota. For more updates on the US housing markets, visit this Facebook page.

REPOST: 6 Steps to Get the Best Mortgage Rates This Spring

In recent weeks, mortgage rates have dipped and this is the perfect time to apply. Here are some tips on how to go through the mortgage application process quicker from this US News article:

With 30-year, fixed-rate mortgages expected to creep upward, keep an eye on your credit score and hold off on transforming your financial picture once you've been preapproved. | Image Source: usnews.com

With 30-year, fixed-rate mortgages expected to creep upward, keep an eye on your credit score and hold off on transforming your financial picture once you’ve been preapproved. | Image Source: usnews.com

If you’ve got the itch to ditch your landlord and take the leap to homeownership, mortgage rates are still low by historical standards. But beware because they are expected to begin creeping higher throughout the year.

“The cost of renting is really high right now. Rents have been rising and rising,” says Lawrence Yun, chief economist at the National Association of Realtors. “Renters are getting squeezed, and some want to convert to ownership.”.

The NAR expects 30-year, fixed-rate mortgages to average 3.80 percent in the first quarter. However, mortgage rates are forecast to start inching higher throughout the year. The NAR forecasts an average 4 percent rate in the second quarter, 4.3 percent in the third quarter and 4.7 percent in the fourth quarter.

Economic forces, including an improving U.S. labor market and faster economic growth, are conspiring to push mortgage rates higher this year. “The Federal Reserve is likely to raise short-term interest rates in the summer, which will be a signal for the rest of the market for rates to go higher,” Yun says.

“There’s a window of opportunity for buying and refinancing at crazy-low rates, but it’s closing,” says Gina Pogol, loan expert at Charlotte, North Carolina-based LendingTree.

If this is the year you want to sign on the dotted line and become a homeowner, experts have several suggestions to help you move quickly through the mortgage approval process.

The overall lending environment remains stringent, and the best mortgage rates will be awarded to those with higher credit scores. Your credit score is a three-digit number generated using information on your credit report, and generally, the higher it is, the better. Here’s what you need to do to get the best rates.

Mind your credit score. “Minimum credit scores required by lenders have steadily dropped, and mortgage insurers’ underwriting guidelines have also loosened a bit, but it’s still a little tough,” Pogol says. “Average FICOs of applicants approved for home loans continue to come down, but they’re still hovering around the 700 mark. Unfortunately, three-fourths of U.S. consumers have scores lower than 700.”

What’s an ideal credit score? “To get the best rate, strive for above 740. That is the benchmark for A-plus lending,” says Jeannie Meronk, assistant vice president and mortgage loan officer at First State Bank of Illinois.

Visit your lender before you hit the open houses. Create a game plan that makes sense for your budget. It pays to talk to a lender about what you can afford and qualify for before you fall in love with a home outside your price range.

“It is really important from a budget standpoint to be shopping in the right price range,” Meronk says.

Just because you qualify for a certain loan amount doesn’t mean that is what you should spend. Consider your monthly budget, and determine what level of monthly payment feels comfortable. Remember that there will be other costs relating to homeownership, including property taxes, maintenance and unexpected repairs.

Also know that most sellers won’t take an offer seriously unless you have been preapproved for a loan. “Preapproval means actually applying for a loan, having your credit checked and your income documented. Preapproved means that as long as the property meets the lender’s requirements, you can close,” Pogol says.

Don’t make any changes to your financial picture. Once you’ve been preapproved, this is not the time to open new credit cards, change jobs, transfer large sums of money or make big-ticket purchases using credit. “Once you are preapproved, don’t apply for any new credit. If you go ahead and finance furniture, it can mess up the amount that you were preapproved for,” Meronk says.

If you are fortunate enough to have a parent, in-law or relative who is willing to gift you some or all of your intended down payment, be sure to talk with your lender about this. You will need to document this properly with a letter for your lender.

If you are thinking of buying a rental property, however, gift money can’t be used toward a down payment. It only can be used for a primary residence, according to Meronk.

If you are self-employed, expect to jump through more hoops. Be prepared to provide two years’ worth of tax returns. If your income fluctuated from one year to the next, underwriters will average the income from the two years. Also, underwriters will look at your income after your business deductions have been taken.

“It often comes as a surprise to self-employed applicants that their gross income isn’t counted by underwriters. It’s their taxable income that’s used. So if you write off every meal and every vacation as a business expense, that comes off the top of your income,” Pogol says.

Organize your financial paperwork and keep it up to date. If you are shopping for a home, keep a file and drop in new documents as you receive them, including your most recent pay stub and all pages of your bank statement.

“Many times applications sit on mortgage processors’ desks because the borrowers have not supplied everything necessary to get the file into underwriting. If an underwriter needs additional information or documents, get that in as quickly as possible. In a busy office, every time your application needs something else, it may be moved to the bottom of a pile and not resurface for days,” Pogol says.

Call your insurance company. Before you close, you will need to procure a home insurance policy. “You need to call your insurance agent and tell them you are buying a house. You need to secure a first year’s home insurance policy before closing. Until I get your homeowners insurance amount, I can’t tell you the exact amount of your payment,” Meronk says.

Steve Liefschultz is the chief executive officer at The Remada Company. Visit this blog for more tips on mortgage application and other related articles.

Home-selling tips: What not to do

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Home sellers can’t just add their homes in a listing without pimping the house to make it attractive to potential buyers. If the house isn’t selling, then there’s probably something wrong with how you are marketing your property.

Some mistakes sellers need to avoid when putting their property in the market are forgetting marketing, overpricing, neglecting the property’s physical condition, and uncontrolled emotional attachment to the property.

Marketing will always help in selling your home, as it launches your house in the real estate pageantry out there for potential buyers to see and consider. Use all marketing sources available, such as posting on social media sites and handing out flyers around the neighborhood. Make sure to take good photos of the property for distribution.

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Even though you spent a lot of money on your property, it is not fair to ask for a very high price. The property’s value won’t be the same since the day you bought it, and an unreasonably high price might just scare buyers away without so much as a counter-bargain.

Cracked walls, stained floors, broken doors, unkept garden, and a neglected curb are big turn offs. Before putting up your property for sale, fix everything to make the property presentable, appealing, and most of all, livable, and highly functional.

Being to transparent with buyers about your emotional attachment to the property should also be avoided. Over personalizing a home, according to this article, can be a distraction to the overall feel of the house. When selling, make sure to do some repainting to give the house a neutral mood for welcoming a change of ownership.

Most importantly, do not sell the house on your own if you do not know what you’re doing. Not consulting a real estate expert for advice and strategies might be disastrous—the property could sit idly for months and you are shorted in your financial goals.

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Steve Liefschultz is the CEO of The Remada Company. For more home-selling and real estate tips, subscribe to this blog.

Applying for a mortgage: The pros and cons of community banks

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Community banks are independent and locally-owned financial institutions that are not affiliated with large financial institutions. The following are some pros and cons of applying for a mortgage at a community bank.

Pros

• Community banks don’t have to report their earnings to investors and instead, focus on serving their customers: homeowners, entrepreneurs, and farmers within their community. In contrast, big bank chains prioritize promoting the best interests of large businesses and corporations.
• Community banks aren’t just about the numbers. Apart from credit report and FICO scores, community bank officers often also consider personal character, family history, and individual circumstances when judging risk in the loan-making process.
• Community bank mortgage loans have faster processing times because all decisions are made locally and do not have to go through a loan-approval committee in another state.
• Many community banks specialize in home mortgage loans and small personal loans.
• Lower fees and competitive mortgage rates are a community bank staple.
• Community banks are typically customer-focused and provide personalized service.

Cons

• Limited locations. Community banks don’t have as many regional branches as big banks, so some areas might not have access to community banks.
• Community banks often have less than $1 billion in assets, which means they cannot grant very large loans.

Although megabanks offer more services, those looking for a good deal on a mortgage loan should consider going local and choosing a community-focused bank. Homebuyers should, however, scout around and speak with a few lenders and carefully weigh the pros and cons of each option before making a decision.

Steve Liefschultz, chairman and CEO of The Remada Company is well-versed in finance and real estate development an management. Follow this Twitter account for more related news and updates.

Online banking: Making safe choices

As Internet use continues to grow and evolve, more and more banks are using the Web to showcase their products and services, reinforce their communications, and conduct their transactions. Over the years, this banking practice has gained the thumbs-up of many investors, whether they belong to the real estate sector or not. In fact, according to a Federal Reserve report there are more than a quarter of mobile owners and almost half of smartphone owners do Internet banking using their devices.

While this is convenience at its finest, Internet banking is not devoid of risks. It places online accounts vulnerable at some point. That is why making good choices can reduce those risks of costly surprises, hacking, and scams. For that matter, USNews.com presents the following online banking security tips. Among the most important of them are the following:

Checking of accounts regularly

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Once detected, suspicious activity should be reported to the bank at once. Regular monitoring of accounts is also a way of ensuring that all posted transactions are authorized by the account holder.

Making it a habit to change passwords always

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This simple yet often neglected online security measure is a practice that the Internet offers as a much safer avenue for banking. Small things like avoiding the same password for multiple sites, mixing up of lower and upper case letters, numbers, and special characters contribute to that added layer of protection.

Accessing accounts from a secure wireless access point

A secure connection, like a private Internet access, boosts banking security. Whereas unsecured wireless access points, including those in coffee shops, train stations, and airports, pose the risk of interception. 


Protection from online fraud is important to any individual or organization. It is important to increase security by making sure that Internet transactions are legitimate and that deposits are federally insured.

For more related topics on banking and real estate investing, follow this The Remada Company-Steve Liefschultz Twitter account.