How to prevent pests reducing the value of your property

Everyone would love to live in their home and not face any problems from pests such as rats and cockroaches running around unexpectedly – especially in front of guests. But an even bigger problem beyond embarrassment is a reduction of the value of your property due to damage pests may cause, or simply the presence of the infestation itself.

Spring is really the time these pests multiply in number, so most of the time April is set apart as a month for managing and doing-away with them. If care is not taken during this period, there may be a negative impact on your property for the rest of the year.

These little pests and rodents can cause a serious devalue of your property by chewing through walls, floors and even electrical wires. It gets a whole lot harder to control theses pest once they find their way into your home. Statistics show that termites cost more than five billion dollars in property damage each year.

Rodents such as rats can cause serious damage and even cause house fires if they chew through electric cables or build their nest beside heat sources. They can be extremely difficult to keep out as they can crawl through spaces and holes as small as cent piece. To control a rodent infestation, seal up cracks and small holes in your home and ensure a proper drainage system at the foundation of your house.

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Home buyers can also be scared to purchase your property because of infestations of pests such as mosquitoes, ticks, cockroaches and stinging insects. These pests which carry diseases and have been known in extreme cases to send people to the emergency ward are a major factor homebuyers would consider before purchasing a house, especially if they have kids and pets which could get easily infected. If any indication of infestation from these kinds of pests exists, please make sure to call an exterminator or a pest professional to handle this issue before it gets out of hand.

The National Pest Management Association (NPMA) suggests that homeowners follow these tips to prevent pest infestations:

  • Seal all cracks and small holes in windows, doors and along the foundation of the house.
  • Repair leaky pipes or fixtures and eliminate any source of standing water that can serve as a breeding ground for insects.
  • Trim trees and bushes close to your living space and cut any branches having direct contact with your house.
  • Clean your gutters.
  • Always clean your yard and remove accumulated leaves and debris.
  • Keep your kitchen especially clean by wiping the counter tops, tables and always empty the trash. Always seal containers carrying food.
  • Keep indoor and outdoor garbage containers sealed and clean.
  • Put screens on your windows and doors.
  • Clean cluttered garages, sheds and storage areas where pests can build a nest or otherwise establish themselves.

If you have wooden floors and always, it is advisable to spray them with insect repellant from time to time.

Applying these preventive methods can help you save both the value of your house and your health. This can stop an infestation even before it begins, and it is always easier to prevent a problem than solve it once it occurs.

Have you considered investing in commercial real estate?

Commercial real estate is one of three main types of real estate. This type of real estate has to deal with real estate property solely used for business purposes, such as office parks, restaurants, and malls. There are four different types of commercial real estate leases with each requiring different responsibilities of landlord and tenant.

A gross lease lets the tenant pay only rent and the landlord pays for property tax, insurance, and maintenance. A single net lease requires a tenant pay rent and property taxes.  A double-net lease requires a tenant pay rent, property tax, and insurance. Lastly, a triple-net lease pay requires a tenant to pay rent, maintenance, property taxes and insurance.

Investors are greatly encouraged to invest in this type of real estate and here are some of the reasons to do so.

Commercial real estate property always garners a higher rent per square foot than residential real estate property and therefore commercial real estate property is ideal for investors with the goal of making more money.

New Commercial Real Estate

Commercial risks and possibilities

 

Commercial real estate has a lower vacancy risk, because of the availability of several units, the possibility of having a vacant space is less likely than with residential and single-tenant real estate property.

Most investors are not comfortable with larger investments such as office buildings. There is less competition from investors in the commercial real estate business.

Owners of commercial real estate properties are less emotional about selling their property than homeowners and are more flexible to the market. This means the sales of property is mainly from a business perspective.

Investing in commercial real estate provides the owner a type of tax shelter through depreciation and maintenance of the building. The depreciation write-off allowed by the IRS shelters your business income.

As described earlier with the different types of lease options, you can get tenants to pay most, if not all of the business operating expenses, which is a very common occurrence in the commercial industry. Plus, most lease agreements include landlords getting a percentage bonus from extra sales made by sellers during the time period allocated.

Rent payments from tenants provide the owner with cash to pay the mortgage of the buildings.

Investors get financial leverage with long-term financing combined with partial seller financing.

Long term investment in this type of real estate provides owners with capital appreciation and increased return cash on investment, because of the higher rental rates over time.

Here are only some of the advantages investors in commercial real estate properties have over residential real estate properties. With the tenants paying almost all expenses lets the owner to relax and have time to take care of other businesses or go on vacation, relax or invest in other fields.

It’s All About Converting Real Estate Leads

Real estate agents must always be prospecting for new leads and then turning them into sales in order to stay in business. Capturing leads is just one part of the process. Once you get the lead, you must act upon it so you don’t lose the prospect to another agent. The most efficient way of converting leads is to use a client management system to organize your buyer leads and seller leads. Following up on leads as soon as you get them is also important. People want to work with agents who deliver good customer service and get them results. You must constantly be marketing yourself and your brand so that people remember you when they are ready to buy or sell.

Jennifer Baughn © by / // /\

Finding Real Estate Leads
Real estate prospects can come from multiple sources including the following:

  • Referrals from current and past clients
  • Website
  • Internet and social media websites
  • Newspaper and magazines ads, flyers and brochures
  • Open houses
  • Signage
  • Other brokers
  • Mailers
  • Business cards
  • Networking
  • Social farming

Successful real estate agents have their own website and are always marketing themselves and their client’s properties talking about real estate wherever they go, blogging and keeping up on market trends. They pass out their cards at business and social events. Agents advertise their name and company brand in the community, sponsoring events, ads in newspaper and other print media and on the Internet. Letting people know you are a Realtor, providing valuable information and constantly reminding them you are there when they need to buy or sell will help you capture more leads and convert them to sales.

Realtors also establish business relationships with vendors and other people they do business with constantly referring business back and forth to each other. This may include mortgage brokers, home inspectors, contractors, movers and other people in the real estate industry. They forge alliances and friendships with other real estate agents inside and outside of their area. Since most real estate agents specialize in one or two areas, when they have clients that want to buy or sell in areas that they do not work, they refer the business to another agent. Referral fees generated from other Realtors are a great source of increasing revenues and generating sales.

Many times Realtors from the same company who work different neighborhoods will team up to list a home. For example, if Realtor A works an area where Realtor B does not, and Realtor B has a client who wants to sell their home located in Realtor A’s area, Realtor B may ask Realtor A to either co-list the house or may simply refer Realtor A to the seller and ask Realtor A for a referral fee when the house sells. This way, the lead is not lost, the client gets an experienced local Realtor to sell their home and each Realtor also makes money.

How to Convert Real Estate Leads?
In order to capture leads, you need to respond within 24 hours or less. Otherwise, the lead may contact another agent. People tend to work with the agents that respond the quickest to their inquiries. Good customer service is essential to capturing new clients, keeping your existing clients happy and growing your business with repeat sales and referrals. People will want to work with you if they know they can count on you to respond to them.

When you contact a lead, screen them to find out their motivation and time table. If they need to buy or sell now or within the next month or two, then you know they are a hot lead. Warm leads are clients who are interested in entering into a real estate transaction within the next six months. Leads that have no specific motivation or time table are cold leads. Hot and warm leads should be pursued first because those will most likely turn into sales quicker. However, it is a good idea to keep in touch with cold leads, sending them information on an ongoing basis because eventually they may turn into a hot or warm lead.

When working with buyers, be sure to find out all the buyer’s criteria including price, number of bedrooms and baths, amenities and upgrades they want and home style preferences. When working with sellers, ask why they want to sell and if they need help purchasing a new home. Even if they are moving out of the area, you should offer to find them a Realtor. This way, you can also collect a referral fee and grow your business by just sitting back and waiting for a check to arrive after they buy. By screening your leads carefully, you will save time and money.

Real estate is a numbers game. The more leads you capture, the more sales and income you will generate. Your business will grow and your hard work and efforts will pay off. You should never stop prospecting and turning leads into sales, or you may find yourself looking for another line of work.

The key thing to remember is to maintain an honest approach to your work, and this extends to your approach to gathering and converting leads. Professionalism and a genuine transparency is everything.

What Makes A Good Real Estate Agent?

Finding a good real estate agent who you trust and who is knowledgeable about a particular neighborhood or area is important when buying or selling real estate. A local real estate agent is familiar with the properties in that agent’s area. Choosing a company that has name recognition in the area is also important. There are usually a couple dominate brokerage agencies in most areas.

The difference between an average and above average agent is the above average agent makes a point of seeing all the new listings in the area and also makes relationships with for sale by owners. The agent will preview properties for buyers and also keep track of properties that are in competition with their own client’s listings. Being able to discuss and compare the different homes on the market and their features in order to overcome buyer’s objections and help sellers price their homes is what makes a great agent.

Real Estate BarCamp 2010 © by Nick Bastian Tempe, AZ

Agents also meet other buyers when they conduct open houses so that they always have a pool of buyers who are ready and able to purchase homes in the area when a new listing comes up. An agent who is on top of the market in their area is always one of the first agents to show a home when it hits the market. The best agents network with other agents in their company and with other brokerage firms to share information and help sell each other’s properties. Being able to match buyer’s needs with the inventory in the neighborhood and being able to price homes to sell is what sets good agents apart from the rest.

Choosing a Good Real Estate Agent

One of the best ways of selecting an agent is through a referral from a friend or family member. Or if you have had a positive experience with an agent in the past, you may want to contact use them again. Data taken from the NAR shows that 39% of sellers rely on a referral to choose their agents, while 22% of buyers used a Realtor that they had a used before. Out of sellers, 16% interviewed at least two agents and 18% spoke with three or more agents before making their decisions.

Other places to find a real estate agent include the local newspaper, Sunday open houses, driving around the neighborhood looking for signs, walking into the local real estate office, searching the Internet and using employer relocation company services.

Qualities of a Good Agent

  • Knowledge of the local market and market trends.
  • Does their own showings or uses an assistant.
  • Uses the latest technology.
  • Holds professional designations and specialties. What this means is the agent has taken extra education and training.
  • What type of technology do they use?
  • What professional designations or specialties do they hold? This means they have taken additional training.
  • Are they members of the National Association of Realtors? NAR members are held to a higher standard and a code of ethics.

When you have a good real estate agent, they are always putting their client’s needs before their own. A good negotiator is crucial and someone who is outgoing, social, has a great reputation and works for a reputable company are other characteristics to look for when choosing an agent. Also being able to overcome obstacles that may arise and being a good problem solver is a must.

Having the right agent representing you can make a huge difference in your real estate transaction experience. A good real estate agent will help save you money and time and make sure your real estate experience is a positive one. Above all, it is important to choose someone that you like and trust because you will probably be working together for at least a few months. If you feel confident that you can rely on your agent’s advice and that the agent is providing you with current information about market conditions, new listings, comparable homes that have sold and real estate trends in your area, then you know you have chosen the right person for your real estate needs.

Why Rising Real Estate Prices Are Not On Everyone’s Wish list

Why rising real estate prices are not on everyone’s wish list

I read a lot of real estate related material – articles, blogs, research and reports – and all seem to have this underlying assumption that I have a hard time with. Most cheer when prices of real estate go up and seem to want to jump off the nearest precipice when they drop. I don’t understand this, especially from professionals in the industry.

Sure, there are people who want the value of their home to rise so that they can sell it, pay off the mortgage and maybe have a little to spare. But most people who own real estate are not in that position – especially real estate agents, brokers and other industry professionals and investors.

Houses going down © by Images_of_Money

Real estate industry professionals – you’re first

If you make a living selling or leasing real estate, you’d have to be nuts to want prices to rise. If you look at increased prices and you see dollar signs because of higher commissions, then you need to get better at your job.

Lower prices mean that buyers are out there and will sign on the dotted line to secure a property. The problem is that you need to get better at your job – get listings in an environment where prices are generally lower. Sure, low inventory is an issue, but get creative. If you sit in your office and await a property owner to walk through the door to sign you up as a listing agent you’re dreaming. Same applies to waiting for the phone to ring.

Get out there and talk to people – honestly. Don’t promise the world, be an honest real estate professional and you’ll be surprised at the reputation you get around the place. It’s a good thing. If the going is tough, get creative – that doesn’t mean get gimmicky either, get real.

Real estate investors – you’re next

So you’re a real estate investor, that’s great – but if you are and you rely on prices to go up to make money you’re in the wrong game. Seriously. If your business and income is reliant on asset appreciation, you’re in trouble. You’re essentially gambling, because capital gains are not something that you can control.

So your real estate investment business plan has to include some cash flow properties so earn that all important income. Honestly, if you have structure your property well enough, then property values should almost be irrelevant.

So please forget the fascination with real estate values – they are largely a subjective figment of the valuer’s imagination anyway. Concentrate on making your business independent from fickle market fluctuations.

Why Work With Partners In Real Estate Investment

This is number eight in our ongoing series on creating your own real estate investment business plan.

Teaming up with partners helps to reduce your initial investment and your ongoing maintenance because you and your partner can split the down payment and closing costs as well as the other carrying costs. You and your partner might want to form a formal partnership or a limited liability company to acquire your properties. If you each put down a 10% down payment, then you won’t deplete your cash, and you don’t have to have as much in reserve for maintenance and repairs.

You and your partner can share the costs and reap the rewards together to turn your business into a profitable venture. Or you may want a partner that puts up the majority of the money, and you do the work of finding and negotiating the deals and taking care of the renovation costs. There are many different ways to structure your partnership. The main point is having a partner means you don’t have to do everything yourself.

Strategic Autumn Meeting 2009 © by aiesecgermany

Finding a partner can be done in many different ways. If you do not have a friend or family member to go in partners with, then you may want to team up with an experienced investor.

Talk to everyone you know. Tell them you are an investor, and you are looking for a partner. Join an investment club, answer a newspaper ad or find a partner on the Internet. Just be careful to choose a partner you can trust and who is willing to do his or her share of the work. Be sure to put everything in writing to avoid any misunderstandings later.

Your time is another factor to consider. Time is money so you want to make sure you organize the time you spend finding a property, rehabbing it, maintaining it and selling it so that your investment is profitable and worthwhile. There may be occasions that you need to leave town or you may have a full-time job, live out of the area, or just don’t have enough time to manage your property. It might make more sense than to hire a professional management company to take care of your property. These are all factors that should be taken into account when making a business plan.

If you spend 10 hours a week finding and viewing properties, another 10 hours following up on leads, 10 hours managing and repairing the property and another 10 hours a week doing booking, your are working full time on your real estate business. But let’s say you already have a full-time job, then you would be working 80 hours a week. So obviously, you would need to hire an assistant, work with a Realtor and possibly hire a property manager or handyman to help you out. Put down everything on paper and calculate which way works better for you financially.

The Best Ways To Increase House Value

Maintaining your house and increasing its value benefits you and your neighbours. No one wants to live in a neighbourhood where the homes are run down and the yards are overgrown. Keeping your house in good condition inside and outside also adds value to your neighbor’s home and vice-a-versa. Statistics show that homes that are not well maintained lose as much as 10% of their value. Routine maintenance items should be a part of your budget when you own a home. Maintenance costs will run you on average 1% to 3% of the purchase price you paid for the home. Setting aside cash reserves for emergency repairs is also a great idea so you are prepared in case something unexpected breaks and needs to be fixed immediately.

Saving Money While Building House Value

Having a checklist is an easy way to keep up on all the various items that need attention. Routine maintenance will also save you money on expensive system repairs down the road. Your home’s heating and air conditioning systems should be on maintenance contracts. It is also a good idea to have a pest control contract. When you buy your home, you should either ask the seller to purchase a home warranty plan for you or buy one anyway. It’s like an insurance policy. For a simple service call fee, a repair person will come to your home and either repair your home’s systems and appliances or replace items covered under your warranty plan. Read the policy exclusions carefully though so you understand what items are excluded from coverage.

© by antjeverena

Getting in the habit of fixing minor leaks and caulking around your shower or tub can be done easily and inexpensively and save you money later on. Some homeowners pick certain projects each year like updating a kitchen or a bathroom or painting. Adding upgrades to your home, especially remodeling kitchens and bathrooms is a good way to add value to your house and recoup your investment later when you go to sell. Changing the flooring, getting new carpet, adding wood floors, changing hardware, getting new windows and installing a new roof, if needed, are also recommended improvements. According to real estate experts, even a minor kitchen remodel of approximately $20,000 can allow you to recoup about 78% of your costs. Improvements such as converting an attic space to another bedroom, may allow you to recoup up to 81% of your costs. Improvements and upgrades help you to receive your maximum sales price when you sell your home.

Other Green Improvements and Technology

Homeowners can add value by making their home high tech and green. In today’s technology driven world, having a high speed Internet access is mandatory. Wiring your house for audio, video, security, and communications is at the top of the list of smart improvements. Other improvements such as multi-zone heating and air conditioning systems and programmable thermostats are great ways of turning your home into a technology home. Replacing old appliances with new energy saving appliances and lighting will save you money on your electric bills and increase the value of your home. Making improvements that allow your home to use its natural light, open spaces, use of sustainable materials, using storm water for landscaping and irrigation and other resourceful ways of using water should be high on the list as well. They add value, help your home run efficiently and help the environment.

By routinely maintaining your home each year and putting away cash reserves for emergency repairs, you will be able to keep your home in good working condition and enjoy the upgrades and improvements at the same time. You will also be adding to your house value. So when you do decide to sell your home, you will be able to recoup your investment because your home will have appreciated in value and you won’t be faced with having to make expensive and major repairs. Buyers will appreciate the care you took to maintain the home, and you will be able to overcome buyer objections making it easier for you to sell your home quicker and help you receive top dollar for your home whether home prices are appreciating or falling.

Should You Buy Real Estate With Cash Or Seek Finance?

This is number seven in our series on formulating a real estate investment business plan.

Deciding on how you are going to pay for your property is absolutely crucial. You will need to decide whether you will be using your own money or other people’s money to investment in your mobile home community. Keep in mind if you are obtaining financing you will probably need a minimum 25% down payment for investment property. So if you are purchasing a $500,000 property, then you will need a $125,000 down payment. The question is where are you going to get the money? The following are common financing sources that you can use to purchase your assets:

  • Private money lenders such as friends, family, acquaintances or other investors
  • Owner financing.
  • Traditional financial and lending institutions.
  • Conduit loans. These are pool of loans on similar type properties that are sold to investors. They are regulated by securities laws, and it is difficult to change deal terms once they have been negotiated. There are substantial penalties for early pay-offs too.
  • Savings accounts
  • Equity line of credit
  • 401 (k)

sasvings and mortgage © by 401(K) 2012

The ins and outs of financing
Most new investors do not have cash so they are relying on using other people’s money. Either they must borrower from a private investor such as a friend, family member or a hard money lender. Using other people’s money is a strategy that investors like because they can purchase an investment property with someone else’s money. This is referred to as leveraging. The thing about leveraging is that it can get you in trouble if you leverage too much and find you cannot repay the money quick enough because your property has not generated enough cash flow. So be careful when you borrow that you have a repayment schedule that makes sense and it a realistic one that you can meet.

When you pay back money you borrow, it is generally amortized over a certain period of time. This means a portion of the payment goes towards interest and a portion towards principal. By making your payments, you reduce the principal over time until you have paid off the property. If you are paying interest only, you won’t get the property paid off. This might be okay if you decide to sell it and it has appreciated, but if you intend to hold on to it for awhile, then avoid paying interest only. Caution and minimum risk is the best advice.

Private money lenders may lend you money quickly at a slightly higher rate if you need to rehab the property and turn around and sell it for a profit. They can do so because they do not have to adhere to lending laws like traditional lenders do. They are more interested in whether the property is priced right and when they can receive their return on their investment.

So let’s say in our example above you purchase the home for $200,000, borrow $10,000 to rehab it at 6.5% interest from a private money lender, and then turn around and sell it for $300,000. You still made a profit even though you leveraged the rehab costs. Another example might be that you purchase a distressed property with your line of credit from your personal residence. The property value goes up on your personal residence and our new property. When you go to sell, you make a profit of $25,000 on the new property and you pay off your line of credit.

Now you can take that $25,000 and put it on a down payment on a distressed property that you bought for $100,000 that you plan on keeping and renting out. You obtain a mortgage for $75,000, and you make a positive cash flow of approximately $250.00 a month on your rental income. You leveraged the money you made on the new purchase and were able to buy another property with positive cash flow for under market value. You repeat the pattern and purchase five more homes, you see where there is going. You have acquired more property with equity and positive cash flow.

Careful when leveraging
But again, caution is the word when you decide to leverage. Do not over extend yourself, because if property values plunge, you will end up upside down on your mortgages and risk losing your properties to foreclosure if you cannot afford the monthly mortgage payments.

Qualifying for traditional financing has gotten tougher these days. Lenders want perfect credit scores from their borrowers and larger cash down payments. You will need at least 20% -25% down payment or more to get a mortgage on your investment property and good credit score. Always line up your financing first before you make an offer. The lender or mortgage broker will pre-qualify you and give you a letter to present to the seller or their real estate agent. Shop around for rates.

Working with a mortgage broker allows is a good idea because the mortgage broker does the work for you. Mortgage brokers work with many different lenders and can find you better rates and terms than if you try and do it on your own. You might want to establish a relationship with a couple banks as well. When rates are going up, lock in your rate as soon as you can.

How Accurate Is A Property Appraisal?

Since home appraisals are estimates of a home’s worth based upon current market conditions, just how accurate is an appraisal? Appraisals are written reports that are prepared by certified and trained individuals who must complete certain education and job training. Appraisers must adhere to the Home Valuation Code of Conduct or HVCC (the “Code”) for Fannie Mae and Freddie Mac loans when they appraise the property. VA and FHA loans are excluded from the Code.

Lenders require an appraisal be prepared by a certified appraiser when they are lending you money to buy a home or refinancing your current home to ensure that they will be able to recover their investment if you default, and they have to sell your home to pay off your loan balance. Buyers rely on appraisals to determine if they are paying the right price for a home, and sellers rely on them to determine the market value of their home when they need to refinance to a lower interest rate, or they want to know what a buyer may be willing to pay for the home when they go to sell it. With so many people relying on real estate appraisals, there is a lot of pressure on appraisers to make sure that the value of the home is in line with current market conditions.

What a difference six years makes... © by kjarrett

Measuring appraisal accuracy using the sales comparison vs. the comparison approach
Appraisers use several different methods of appraising property. The most commons methods used for appraising residential properties are the sales comparison approach and the cost approach. These methods are recognized by lenders and other industry professionals as the most accurate ways of determining a home’s value.

The sales comparison approach is when the appraiser compares three to give similar properties that have recently sold while making adjustments up or down for improvements, lots size, square footage, upgrades, year built, location of the property and amenities of the property that you are interested in purchasing. The cost approach is used by appraisers when you are purchasing brand new construction from the builder to determine the replacement value to rebuild the home if it were totally destroyed by a natural disaster.

These appraisal methods give you and your lender an accurate way of determining the home’s worth. The lender is looking at both the borrower’s credit worthiness and the value of the home. They want to make sure they can recoup their investment should the borrower default later. While there is no absolute guarantee that the home will be worth the same or more if the lender foreclosures on the property at a later date, it gives them enough information to determine if they want to lend you the money to purchase the home or refinance it at the present time.

Mortgage brokers and real estate brokers must also understand the different appraisal reports so that they can advise their clients whether or not the home is priced right and a good investment.

When market conditions are changing and prices are in flux- either going up or going down, sometimes a home does not appraise. It is important to use a local appraiser that understands the market conditions in the area. When an appraiser is not familiar with the area, they also rely on local Realtors to help them by supplying them with information regarding recent sales and pending sales when there are not enough closed sales to substantiate the value of the subject property.

What Happens When a Home Does Not Appraise?
If a home does not appraise, the buyer has the choice of paying for another appraisal, asking the seller for a price reduction, putting down a higher down payment or walking away from the deal. That is why it is extremely important that the appraisal reflect the true market value of today’s market conditions. If the appraisal reflects the wrong value for a home, a buyer may not be able to buy the home or a seller may not be able to refinance to a better interest rate to lower their monthly mortgage payments. Understanding how appraisals work and how home values are determined is an important aspect of the home buying process. Your mortgage broker, lender or Realtor should be able to explain the appraisal process to you and answer your questions.

Appreciation And Cashflow: The Foundation of Real Estate Investing

This is number six in our series on building a real estate investment business plan.

Appreciation is the increase in the value of your property over time from when you purchase the property until you sell it. Economic factors control whether a property goes up or down. Unfortunately, real estate investors have no control over economic factors. So it is a mistake to think about buying a property solely for the appreciation factor.

However, you can buy a property at or below market value and fix it up to market standards or above to increase the value of the property. Since this forced appreciation is something you do have considerable control over, looking for a property that is undervalued makes sense because you know that you have a built in equity and appreciation after you purchase and rehab it.

American House of Dollar Bills © by Images_of_Money

Building property values
You know can increase the value of your property by making improvements that are cost effective and give you a higher rate of return like updating kitchens and baths, adding a new roof, replacing flooring, painting and landscaping. Try not to make too improvements that are too costly because you won’t be able to recoup what you spent when you go to sell the property. The smaller less costly improvements tend you pay off better. In a seller’s market when there is less inventory and high demand, prices appreciate. When there is a too much inventory and it is considered a buyer’s market, prices go down. Real estate goes in cycles.

Demand influenced by economic conditions such as employment, types of jobs, interest rates, availability of land, and proximity to transportation, public services, shopping, restaurants entertainment, population growth, desirability, crime and property tax rates is cyclical. Unfortunately, investors and buyers have no control over economic factors, but there are indicators when interest rates change, unemployment rates go up or inflation occurs. Savvy investors keep an eye on economic conditions when there are indications that there may be change one way or the other. For instance, the past few years, investors have been investing in distressed properties because there has been a huge influx of foreclosures and short sales constantly flooding the market.

So if you purchase a distressed property at or below market value at least 20% to 60% below the retail price, if the property appreciates, you have a nice big property when you go to sell it. For instance in our example above, the distressed property you purchased for $200,000, rehabbed for $10,000 and then sold for $250,000, gives you a nice profit on the appreciated value of your upgrades that only cost $10,000.

Property values and price fluctuations
However, let’s say you keep the property five years, but the value keeps going down due to economic factors, so you rent it out during that five year time. You find that the property is now worth less than you paid. You would still get the benefits of property ownership and the positive cash flow even if the property depreciated. If you keep it for another five years, the market values may appreciate back up to what you paid for it or a little higher.

As long as you are getting a positive cash flow, you are still benefitting from owning the property. Unless you are experiencing a financial hardship, you probably don’t need to sell the property and can hold on to it until property appreciates again.