Its not a failure if it helps!

Short sales are still a very prevalent part of the Central NJ Real Estate market.  With uncertainty in the market and economy as a whole there are an increasing number of people out there that are strategically selling there home to get out from underneath the debts of high interest mortgages and negative equity in your home.  Some believe that selling your home short is a failure, but in my opinion this can be a huge relief and can help in the long run for many bound by financial constraints of your homes mortgage.

While some were forced into this situation by purchasing their home at the wrong time, others were hurt by a number of outlying factors that forced them into financial hardships.

The Mortgage forgiveness act has been extended to January 2014!  What does this mean for you.  It means that it is time to sell your home.  NJ homeowners will be forgiven from having to pay promissory notes if they sell before the year is over.  (Your tax professional can give you the details on this, but this should apply to most.) The government has agreed that it is important to help those in trouble right now and taxing those who are already in dire financial straights will just hold us back as a community.

Many people have called it quits due to the economy.  Some lost there jobs, and the hefty mortgages that they had were just too much to handle.  Many of these people lost everything when they let their house to go, forcing them to start all over.  Depending on how old each individual were this could be a devastating financial blow losing their NJ real estate holdings.

The others out there are now strategically selling there homes short and just starting over.  Some people just bought their home in the height of the NJ Real Estate market and this has left them with a large sum of negative equity in their home.  Between paying Principal  interest, taxes, and insurance some have deemed that it would make more sense to simply stop paying, sell the home, and save the money that they would have been making toward mortgage payments.

Many homeowners are socking away what they would have paid and living in the home until it is sold.  They are than going and renting a home and simply waiting until they can fix their credit again so that they can purchase again in the future.  This time period of no payments can really help people put themselves in a much better financial situation by paying off debts that they were struggling to pay down, buying something that they may have needed to better help themselves achieve financial freedom, or just simply allow them to save money or fund a retirement account that was neglected.  So not only are they relieving themselves from a huge financial obligations but also paying down debts and bringing themselves back to zero or even back in the black.

If you are among these people that short sales have helped than it is not a failure to sell your home.  Many have been in your shoes and there are many more still in this situation.  There are lots of buyers currently in the market to buy homes and with the shortage of inventory there are many that will be looking to purchase your home as well.

If you are considering making a strategic move it is important to always entrust your accountant, attorney and also your local broker to help you achieve your goals.

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NJ Real Estate Needs Inventory!

If you have been on the fence about selling your home and were not sure when to do it, the time is now!  The Central NJ Real estate market has picked up tremendously over the past few months and seems to be heading in a positive direction.  If you have thought about buying or selling now or in the near future, there is no better time than NOW!


Sellers may ask “why is now the time to list my home?”  Well the answer is quite simple.  If you have thought about moving or just need to sell there is a shortage in the real estate inventory here in NJ.  The interest rates are still near record lows and the buyers have been coming out to preview what little inventory is left.  This has created a bit of a frenzy and homes that were once over priced have now been getting showings.  So simply put, although it is still a buyers market, sellers have seen a slight up tick in pricing even if it is only for the short term.

There are a lot of intangibles in the market right now.  Although consumer spending and confidence is up, we have no real outlook on what is going to happen with all of the foreclosures.  This is still a big question mark although it seems to have slowed to a crawl, things could pick up here very quickly as we have seen in the past few years.  Lets play this by ear and see how it plays out, but this should not discourage you if you are in a position to buy.  Money is still cheap and real estate is still a good option to shelter your money over the long term.  

So if you have thought about selling your home and don’t want to wait for the market to completely rebound, now is the time.  Get your property listed before the spring market and beat the rush of all of the people looking to sell in the spring time.  Buyers are out there just waiting for your property to come to the market so list today to get your home SOLD! 

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To slum or not to slum?

Real estate can be a great investment for those who have really put some time into researching the right property. It can not only be an instant form of cash in your pocket it traditionally helps fight against inflation. Although there are tons of tax benefits and different ways real estate can add to your portfolio the topic I would like to discuss today is where and what to buy and how much money to out into the home. Do you want to be a slum lord or do you want to have a property that most people would like to call home?

To me the decision is easy and the process can be easy. Like any investment buying it right it always the first step. But unless you are a savvy investor this may not always be so simple. Your kitchen and baths are always the first thing that people look at. You don’t always have to go crazy but making sure your kitchen is in good condition is important. You don’t have to go crazy with granite but this is definitely a bonus if your bottom line can handle it. Cheap cabinets and a Home Depot special countertop can really go a long way. If you have a nice product not only will you be able to rent it quickly you will get more money. Next step is paint and carpets. Alway always always paint after every tenant. New tenants will notice these types of things. Again I like the appearance of laminate floors and this can increase the value of the unit and also will save you money in the long run because you don’t have to change carpets again and again.

I am a firm believer in you get what you put into it. Not only will you yield a bit more money when you spend it but you will also have better tenants. You will find someone that will take better care of your place and also be able to pay on time every month.

I deal with owners that work on both ends of the spectrum and the majority of my repairs come from the homes that have been neglected that the owners constantly put band aids on. I am a firm believer that if you do the job right the first time it costs you far less in the long run. Time is money and if you have to spend two days dealing with the same problem you have already lost.

It’s time to think smarter about your rental property. If you go the extra mile to make your place a bit nicer it will be more lucrative and less problem-some in the long run. Better properties will get more applicants and with more applicants you will be able to pick and choose the tenant that is best for you.

So… slum or not to slum? I don’t think it matters where you buy investments at. If you put some money into the property and properly screen the tenants you can have a great investment anywhere!

Posted in Foreclosures, Property Management, Real Estate, Rentals, Section 8 | Leave a comment

3.5% down construction loan

It has been a while since I have written a mortgage but this is a program that can really help a lot of people buy a home that they would not normally be able to buy. First time home buyers can use this mortgage to purchase a home and renovate.

What a great concept. Lets think about it. You walk into a foreclosed home that doesn’t have a kitchen at all. Normally a buyer would not be able to buy it if they have a limited amount of savings. With the 203k loan you are able to finance the renovation costs of putting a new kitchen and simply pay down payment based on the purchase price and renovation costs. For example if you purchase a home for 100k and need 20k to put a new kitchen into the property. You would have to make a minimum downpayment of 3.5% based on the 120k. WOW!

If you already own a home you can also refinance using this program. The possibilities that this has are just awesome. Obviously like anything else this is not the right program for everyone but is worth talking to your local mortgage lender.

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Buy, Lease, and “hold on tight”!

Now is the time to buy, than buy again and again!  Savvy real estate investors have been entering back into the market over the past year.  They think that whether they are buying cash or taking out a mortgage that there are a lot of great opportunities to make some money in this market.

For people looking to invest in the market and are a little more green in the whole thing, there is still a deal for you too.  If you have thought about investing in a home for your future or retirement and are a just afraid because you feel like the market may still drop, I would take a long look at the investment and if your cash on cash investment is positive than go for it.  Is the market going to fall more?  My short answer is YES!  Should I buy knowing the market is going to drop more.  Again…YES!

Home values may drop, but if you are looking at the home as an investment than you are in it for the long-term.  Think about it as a 401K or an IRA.  You are not putting money into it for a short-term get rich quick investment.  This real estate investment the numbers have to work.  Money has never been cheaper historically, and if you take a mortgage out and rent your home you are looking at what your cash on cash investment is.

I am a numbers kind of guy, so lets take a look.  Lets assume you are buying a two family for 300K.  Todays mortgage guidelines for an investment property call for 25% down payment which would be 75K down, leaving you with a mortgage of 225K.  Even if you take a 6% interest rate which would be high today, you have a payment of 1350 Principal and interest (P&I).  Assume 6000 for taxes and insurance (T&I), and this gives you a total payment of 1950 (PITI) per month.

Now again lets take a similar approach like in my last blog post and assume 1400 per unit.  This gives you a monthly income of 2800 per month.  So if your income is 2800 and your liabilities are $1950 your total monthly income would be $850 per month.  Now lets take a look back at the down payment of $75,000.  If you take your $850 per month and spread that out over the entire year you get $10,600.  Divide 75000/10600 and you come up with your cash on cash return of 13.6% annually.  This would be a fantastic investment in anyone’s portfolio.

Your accountant will know best, but you will also be able to take a number of other write-offs against the home which will allow you to increase what your overall return on investment.   Remember that you are also paying down the mortgage every month so you are gaining equity in the home as well.

If you all can’t tell already I am passionate about real estate.  I think that it is a great investment if you have the cash to do it.

Property Managers

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Dont BANK on it?

The holidays are coming and with that comes the moratorium on foreclosures.  Some of the banks were talking about renting out their foreclosed properties which makes a lot of sense, but I have not seen anything just yet.  In my opinion the banks are leaving thousands of dollars on the table for each unit sitting vacant.  What are they thinking?

Renting one vacant unit could pay for a lot of repairs and habitability issues that are needed to get these units fixed up.  The added income would help out the investors that have backed all of these mortgages.  It would also bring extra money back into the economy.

Think about the economics here!  One 3 BR section 8 voucher in NJ goes for around 1300-1400 depending on the area.  So lets take the low side.  1300 for the year equates to 15,600 for the year.  Even if the bank spends all of that money-making capital improvements to get the unit up and running it still makes sense.  You have an asset that is improving in value, occupied (so it’s not being vandalized), and year two should net some money back to the investors who were not going to make anything if they simply sold the distressed home.

Lets use the resources that we have at hand!  Hire someone who has the ability to lease and manage these homes for you.  The more eyes on the property the better off it will ultimately be.  The property manager can hire as needed any workers to repair the property.  Than wait a few years for the market to turn.  In my mind it is going to be 2016 before we see any uptick in the market as a whole.  In NJ we are a little better off than most because of our proximity to NYC, but in this case we will take 5 years.

So assuming the best case scenario you have a tenant that stays for the full 5 years . 15,600 x 5yrs= $78,000.  Leasing and Management fees would be approx. 9000.  Lets say improvements cost another 20% over the five years.  Lets also assume 3500 annually for taxes and insurance (most likely cheaper since a lot of these are in depressed areas.)  All of the fees for the property 24,600 and taxes and insurance would be 17500.  After all is said and done the bank will actually make a profit of 35,900 over the five-year period.  Best of all is that none of this takes into account that all of the expenses can be written off against the house.

These numbers are just for one unit and are high projections.  Most of the homes are also two and three families so each building could be more than doubled.  I say the banks should make a full court press at making the capital improvements necessary to get this all done and bring some money into the company coffers.

Property Managers

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Leaves changing, seasons changing, changing filters

The seasons are changing and that means it is time to do some preventative maintenance on your home and investment properties.  It is beneficial for you to have your furnace checked out, and yard work done properly.  The seasons are changing and you should have some piece of mind that you are not going to see any big ticket items go bad.

A little maintenance now could go a long way later.  You should have your furnace cleaned and your air filters checked out in your home.  As someone who manages several rental properties, I can tell you that this time of the year always has the biggest financial repercussions.  If you have a contract with your gas company the cost to maintain your furcance year over year is a small cost.  More and more people are paying service fees in order to have the piece of mind that if anything goes wrong there is someone to call.  These fees are minor compared to the life of the furnace.

Another thing that you should think about is who is going to clean your lawn and gutters.  Managing your property the right way can really help hold the value of the home and protect your home from the elements.  Homes can become costly if you let things go too long and small things like cleaning the leaves off of your yard and out of your gutters can save you money on your investment property.

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