Real Estate Math – Do You Know These Simple Formulas

How much real estate math do you need to know if you are investing in real estate? There are computers and calculators for calculating interest rates or amortizing loans. What you need to know is a few simple formulas for determining if a property is a good investment or not.

The gross rent multiplier is one formula you don’t need. I bring it up because people are sometimes still using it, and there are better ways to estimate value. A gross rent multiplier is a crude way to put a value on a property. You decide that properties are worth 10 times annual rent or less, for example, and simply multiply the gross annual rent a building collects by ten to get your value.

There are obvious problems with this formula. You need to constantly change it to reflect interest rates, because a property might be profitable at 12 times rent when interest rates are low, but a money loser at eight times rent if the financing is expensive. Also, there are just plain different expenses for different properties, especially when some include utilities in the rent, for example. Gross rent doesn’t say much about the factor that makes a property valuable: the net income.

Rental properties are bought for the income they produce, so this is what your real estate valuation should be based on. That is why your real estate math education needs to start with the how to use a capitalization rate, or “cap rate” to determine value. A cap rate is the rate of return expected by investors in a given area, or the rate of return on a property at a given price.

An example might make this clear. Take the gross income of a property and subtract all expenses, but not the loan payments. If the gross income is $76,000 per year, and the expenses are $32,000, you have net income before debt-service of $44,000. Now, to arrive at an estimate of value, you simply apply the capitalization rate to this figure.

If the normal capitalization rate is .10 (ask a real estate professional what is normal in your area), meaning investors expect a 10% return on the value of their investment, you would divide the net income of $44,000 by .10. You get $440,000 – the estimated value of the building. If the common rate is .08, meaning investors in the area expect only an 8% return, the value would be $550,000.

Estimated value equals net income before debt-service divided by cap rate – this really is simple real estate math, but the tough part is getting accurate income figures. Is the seller is showing you ALL the normal expenses, and not exaggerating income? If he stopped repairing things for a year, and is showing “projected” rents, instead of actual rents collected, the income figure could be $15,000 too high. That would mean you would estimate the value at $187,000 more (.08 cap rate).

Besides verifying the figures, smart investors sometimes separate out income from vending machines and laundry machines. Suppose these sources provide $6,000 of the income. That would add $75,000 to the appraised value (.08 cap rate). Instead, you can do the appraisal without this income included, then add back the replacement cost of the machines (probably much less than $75,000).

No real estate formula is perfect, and all are only as good as the figures you plug into them. Used carefully, though, real estate appraisal using capitalization rates is the most accurate method for estimating the value of income properties. For putting a value on a single family home, you need another approach. Yes this means more real estate math to learn, but we’ll save that for another time.

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Preventable Slip-Ups on Refinance Home Loan Pursuit

Even though economic conditions is disturbing and there are plenty unfavorable influences, low refinance mortgage rates are one of the precious benefits of the current environment. Currently there is enough rivalry in the refinance mortgage industry that many banks offer great bargains. Choosing the right deal for a special fiscal necessity could economize you every month hundreds of dollars while making bad selection could result in further liabilities. It is so valuable to explore and check the basics of competing refinance home loan options in advance of deciding on the right one.

A few individuals normally concentrate on refinance home loan rates whilst checking around. There are additional important determinants when shopping around such as duration of the mortgage, closing costs and fees and repayment penalty. It is essential to ask for a Good Faith Estimate before commiting to any application. Costs and fees can rapidly erode any cuts you will get from refinancing. Definitely take the costs into account to decide if it is beneficial to make the switch. Discover how long you may need to stay in your home before seeing savings by finding your on the fence level.

Commonly it is wise that you fix a good rate should you find one. Contrarily, You might end up paying a higher amount at the time the final paperwork is concluded. Obtain the agreed rate in writing and take a note of how far ahead it is applicable for as it is not offered in writing automatically. In particular in a reduced mortgage rate condition, adjustable rate mortgages are only agreeable for borrowers who want to sell the home within next couple of years. Monthly payments could hike considerably if the rates begin moving up. It is likely that you may find yourself in a foreclosure in such position.

Consumers turn to be content with one lender and tend to consult it initially for every financial demands. Definitely search around for the best rates. Although you obtained a home loan before from a particular loan company, you would need to pass eligibility routine once more. So do not rest your hopes on them mainly. In spite of rules to protect borrowers, ambiguous home loan practitioners are still apparent. Many lenders will keep on pushing on customers wrong loans. Remember that banks are in it for profit and may attempt to get the most out of each client.

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Real Estate Guide to Bluffs Cape Fear, North Carolina

If you are looking for the perfect place to retire or buy a second home, the Bluffs on Cape Fear, North Carolina may be exactly what you want. The Bluffs are near Wilmington, NC in the beautiful coastal area. People have always loved to come to this area because of the stunning natural beauty and the many attractions to suit different interests and tastes.

The Bluffs on Cape Fear is a new community being developed with many exclusive features for the residents. This elite community consists of 600 to 700 acres of rolling tree covered landscape. There will be approximately 700 lots and home sites. It offers natural seclusion for relaxation yet is still close to outside attractions.

The Bluffs on the Cape Fear River

Built on the Cape Fear River, this area is accessible to the Atlantic Ocean and the Intra-Coastal Waterway. It is only 15 miles from downtown Wilmington, NC, and less than an hour from many beaches. It is close to all the attractions available in this great NC coastal region. There is a host of outdoor and indoor activities for the whole family.

Located in Brunswick County, the Bluffs on Cape Fear will be a popular area for the baby boomers in their retirement. Brunswick County has been rated in the top 10 beach vacation spots for families. Activities in the area include hiking, boating, fishing, beaches, and golf. There are museums and fine dining, parks, and shopping for every member of the family.

Amenities for Residents

The Bluffs on Cape Fear will be developed with numerous amenities for everyone to use and enjoy. These will be in addition to the many recreational pleasures available at this river front community. These include a private beach club, boating facilities, nature trails and a swim and tennis center. Also there will be boat and RV storage for the resident’s convenience.

There are lots and home sites currently for sale. By buying NC pre-construction, you can reserve your spot now. Your preferred site will be waiting for you when you are ready to build. Because of the high price appreciation in this area, it is the perfect NC investment property. The Bluffs at Wilmington, NC is part of this valuable coastal property.

Invest in Property Now

Now would be the best time to buy property at the Bluffs on Cape Fear. Property values are sure to go up in the years to come and will never be found at these rates again. The potential in this area for expansion and economic growth has hardly been touched. Because of its popularity as a vacation spot, many people are deciding to relocate there. The city of Wilmington, NC has already put plans in motion to expand shopping areas and to put in a new bridge for easier access to beaches.

The scenery at The Bluffs on Cape Fear is spectacular and perfect for a retirement or second home. It is the ideal investment property whether you want to live there now or in the future.

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Real Estate Exchange Tips

Exchange is a program that allows the owner of a certain property that is used for investment to be exchanged with another property and defer paying the taxes. If the like-kind property is purchased, the rules and regulations of the Internal Revenue Code should be followed and observed.

This will allow the investors to gain more assets, have a large control over real estates and expand into other properties. The like-kind property is only recognized if the exchange is for the purpose of productive use like in the business or trade industry and investment. The like-kind property can consider these for investment:

- Duplex
- Commercial Property
- Single Family Rental
- Apartment
- Raw Land

1. Understanding Exchange

There are some points to understand regarding exchange. Here are some tips to guide you with the exchange process. It is important to know the basics of the process. A lot of people are confused about the exchange procedures. If you are new to it, perhaps you won’t understand it that well too. You can ask a professional about the terms and conditions that are unclear. Exchange process is not taken for granted because it has proper guidelines to follow.

If you are not aware with the exchange process, you can read books or if you are that interested, you can attend seminars that focus on exchange. They should be able to show how to deal with an exchange. If you want to be an expert in exchange, you should know a lot of important information and instructions.

Exchange procedures may get complicated but it is important to be familiarized with it. It is not that easy that even the well-experienced investors and professionals avoid the exchange process because of its complexity. Exchange is considered profitable because you if you are an investor, you can still recover the earnings you have lost.

2. Who performs the exchange process?

- Real estate agents
- Accountants
- Attorneys
- Escrow companies

In the earlier years, real estate agents were the ones who specialize in the exchange process. They were the ones who handled exchange matters because they were able to master the important instructions and information of the process.

3. Faciliation Companies

If you want to perform exchange, it’s not really necessary to know all the dos and don’ts. All you need to do is to call an exchange facilitator to advise you throughout the process. Most exchanges are handled by facilitation companies. They are in charge of resolving problems that may soon take place. Complete with the contacts of competent facilitation companies, you are sure to triumph the pursuit to financial independence. This will no longer be a problem. The exchange process is considered an exchange between two parties. Most of the exchanges are the considered to be delayed exchanges. In less than 45 days, they must then be able to identify the possible replacement property after the closure of the property.

4. Who Can Exchange?

In order to qualify for an exchange, you are required to provide some important papers. The Exchanger should sign a written document that is mailed or sent to the person who is obliged and concerned in the exchange. This is very essential in order to successfully qualify for an exchange. All information of the replacement property should be ambiguously stated including the type of property in the personal property exchange.

You must be prepared for your first exchange. You should be able to locate a good exchange facilitation firm with a nice background. You should choose agents who can do the process accordingly and not act as if they know the whole process perfectly. When it comes to pricing, the fees will vary on the services. The rate is from $500 to $1,200. Once you notice that your facilitator can handle the exchange process well, you can take his advice. You can ask for copies of your documents that will be useful as reference by your attorney. It is important to find a good facilitator because time is important and investigation will take a long process but can be cut short if it is handled properly. Take note of these reminders in order to successfully apply or understand the fundamentals and applications of exchange.

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Canadian Reverse Mortgages – How Far Are They Beneficial to The Senior Citizen Category of Canada?

The drastic rise in the rate of aged people in Canada has made “Canadian Reverse Mortgage” as one of the safest and best options for senior citizens. Reverse Mortgages Canada can give a higher degree of security and good standard of living to the older people after their retirement period. The principle of operation of reverse mortgage is just the conversion of your home’s equity value to cash. To obtain a reverse mortgage loan, you need to be 60 years old or more owning a home. With the help of reverse mortgage loans, you can get ready cash on your home without selling it which is the best feature of reverse mortgages. By taking a Canadian reverse mortgage loan, you can enjoy the following benefits:

You are free from regular “Monthly Payment” issues because here the lender pays rather than consumers paying the lender. Reverse mortgage loans can provide a regular source of income to the older Canadian house owners possessing considerable home equity values. Factors like Credit scores and income values are not taken into account in the qualification process. This makes the qualification process even simpler. To get eligible for traditional mortgage loans you need to show proofs for sufficient income and also should pay monthly installments regularly. But with the reverse mortgage loans, there is no need for any such things to be done. Thus reverse mortgages differs in various aspects from a traditional mortgage loan. Reverse mortgage loan is a tax-free income and hence there is no necessity to pay any taxes for Reverse mortgages. In fact to be true, the people have paid the taxes already on their house and so it is now their money and of course their home. Hence reverse mortgages cannot be merely termed as an income. In financial terms, reverse mortgages can be called as a transaction process where your home equity is converted into cash.

There are no restrictions and particular options to spend the money you receive through reverse mortgages. You can pay off normal utility bills and can plan vacation trips too. It is a common incident in Canada where most of the times the homeowners find it difficult to pay their maintenance and utility bills. This type of mortgage lets them to convert the value of their home into cash and thereby allowing them to stay happy in their home till their lifetime. The best part of having reverse mortgage loans is that you can get enough money to lead your living without selling your home immediately. There may be some group of senior citizens who are not badly in need of any additional income and are satisfied with their pension itself can use reverse mortgage as a supplementary income for home improvement and other such activities.

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The Benefits of Getting a New Kitchen

Your kitchen is one of the most important rooms in your home. There are many occasions when the kitchen is the most special place in the house. Holidays, birthdays and many other special events are recognized at home with a special meal. If your kitchen is a place where many people gather during such events, you may be considering remodeling the kitchen to make it a better space for these events.

A new kitchen can upgrade your home in a variety of ways. You can increase the value of your home with a new kitchen. Remodeling a kitchen does not have to be a problem but you must invest the time and resources in making the upgrade from how the kitchen is now to how you want it.

Appliances, cabinets and countertops make up the lion’s share of your kitchen in terms of its arrangement. Older model kitchen may have a limited amount of counter space because that’s the way the designs were in the past. Today, newer homes are being designed with ample counter space such as an island that also serves as an eating space with bar stools on one side.

The choices for upgrading to a new kitchen are only limited by your budget and the size constraints of the space your kitchen now occupies. The latter of which can even be expanded in some cases where a kitchen wall can up opened up for a pass through or counter space to be added.

First try to have a budget in mind of how much you want to spend before you start window shopping. You may find that there are many different types of materials available to design your new kitchen but all of these items may not fit your budget. With a budget amount in mind, you’ll have a better idea of how to manage your selections.

Get as many free appraisals as you can on the project. You may want to undertake some of the project yourself if you are handy with tools and don’t mind some heavy lifting. For upgrades to electrical and plumbing, however, these things should be done by a professional to ensure proper connectivity in all areas.

If you are planning to sell your home in the near future, a new kitchen upgrade will definitely give your home added value. When people come to look at the house, the first room they want to see is the kitchen. This is because many people spend a great deal of time in the kitchen cooking food and entertaining friends. In many homes, the kitchen is a gathering place where many special memories are made.

The upgraded kitchen that has modern appliances that are coordinated to match and offer some of the latest features are attention grabbers that often help to make the sale. Fashionable countertops such are marble and other scratch-resistant surfaces demonstrate a kitchen that is not only beautiful but functional. Although there will be some inconvenience during the upgrade, creating a new kitchen will be worth the while when it is complete.

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Real estate schools of thought

Everyone seems to be after real estate investments as that is regarded as one of the safest high return investments. There are various schools of thought on real estate investments. Let’s explore two of the most common real estate schools of thought.

One real estate school of thought talks about doing a lot of analysis. This real estate school of thought advocates studying a lot of factors which are generally linked to economic indicators. This real estate school of thought evaluates the economic indicators in many different ways. It takes its cues from a number of financial indices and how they are expected to perform in the near future.

This real estate school of thought evaluates various socio-economic indicators at all levels – Global, national and local. This real estate school of thought evaluates inflation and things like value of money today and value of money next year etc. It uses all these evaluations in order to come up with predictions on how real estate industry is expected to fare in the next few years.

So, this real estate school of thought tries to determine the buying power of people in order to determine the course of real estate prices. When it comes to evaluating the real estate trend with regards to a particular place (i.e. locally), this real estate school of thought takes into account various local factors like the unemployment rate, the industrial development in the region, the change in tax policies and any events that might affect the real estate prices in the area.

It also takes into consideration the surrounding areas and the real estate trend in those areas. So, this real estate school of thought is really followed by arch real estate consultants/investors who know a lot about finance and put all that knowledge to use in determining the trends for real estate industry. However, that is just one real estate school of thought.

The other real estate school of thought doesn’t consider those factors at all. According to this real estate school of thought, real estate is always lucrative at all times and at all places. This real estate school of thought advocates looking for great deals. It’s this real estate school of thought that asks you to go to public auctions, look for distress sales and foreclosures, find motivated seller, rehab and sell, etc.

So, this real estate school of thought focuses on getting the information about the best deals in town and taking advantage of them to make good profits.

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