Protective Covenants – Buying A Home

In addition to zoning, some properties have covenants recorded at the courthouse that “run with the land.” These “protective covenants” can put a serious pinch in your plans for a piece of property.

Protective Covenants

A protective covenant remains in effect as the property is sold from owner to owner. The covenants are designed to maintain a certain aspect of the area in question. The covenants may require a particular architectural style or use for the land to mention only a few areas of restriction. As a homebuyer, understanding what these protective covenants can impact your decision. Sometimes these protective covenants are included in HOA documents, possibly as a Declaration of Protective Covenants.

Land in a scenic area may have a protective covenant that prevents certain types of development for the land or properties on it. Importantly, these restrictions may not show up in the zoning laws, so make sure you research the issues before buying. Let’s consider an example of a great buy gone wrong because of a protective covenant.

Investors should be aware that a protective covenant may restrict the number of parcels into which the property can be subdivided. Thus, you could find yourself in a situation in which you buy a one hundred acre parcel with an eye toward subdividing it. Upon researching the issues, you discover the zoning laws allow the parcel to be cut into quarter acre lots. Visions of profit swirl before your eyes. Your development dreams, however, could turn to nightmares if there is a protective covenant.

Assume you go ahead and purchase the parcel. While showing it to a friend, a neighbor from down the road walks up and introduces himself. You excitedly explain your plans for subdividing only to be shocked when he tells you there is a protective covenant that prevents the creation of any lots under ten acres. What if the covenant restricts ANY subdividing of the parcels? That great deal you got on the parcel may not look so hot when the protective covenant is factored in.

So, how should you deal with protective covenants? First, you should ask the seller whether any exists for the property. Second, make sure you buy title insurance as the title company will certainly look for any protective covenants before issuing a policy. Forewarned is forearmed.
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Why invest in HUD home ?

The increased demand for a HUD home drives up the price and new investors tend to get anxious and will buy based on emotion instead of logic because they “just want to get their first deal”. If you pay too much for a property, you will lose your shirt on the deal. That’s why it is important to not overpay for the property because you make your money on a property on the day you buy, not the day you sell.

This is why it’s important to have the right real estate investment training so you know how to spot the good deals from the bad and not overpay for a property, as well as using a real estate agent that specializes in HUD properties. Your first deal can bankrupt you if you don’t structure it the right way. People that don’t take the time to invest in their education are soon out of business because they try and figure it out on their own and fail.

Short Sales are a great way to guarantee that you won’t overpay for properties. If you are wondering “what is a short sale “or are wondering what the “definition of a short sale is“here you go. A Short Sale is when the lender accepts less than what is owed on a mortgage on home foreclosures.

  • We don’t give the sellers any money when we get the deed to their house.
  • The only thing you have to pay when you get a deal is the cost of the notary and recording fee when you record your deed.
  • You don’t need good credit to do short sale deals, depending on your financing.

Pre-foreclosures and Short Sales are extremely easy to find right now, as they are frequently categorized as such in MLS listings.
There aren’t enough investors out there to handle all of the deals in the market.

You may here some real estate speakers say to stay away from foreclosures because there is too much competition. Well that was then and this is now. They are teaching old information because they are not currently practicing what they preach. Short sales and foreclosures can take time to be approved by the bank, but if you are willing to wait, you can usually make a good investment.

Banks are in the money business. They’re not in the ral estate business. They don’t want to own any properties. Their only interest is making interest on their money. Foreclosing on homes is a hassle they have to deal with because it’s a cost of doing business for them. The sooner you understand this the sooner you will realize how huge this opportunity is for you right now.

When banks lend out money – they have to keep a multiple of 5 times the amount of money they lend out in reserves. When a loan goes bad, it’s now considered a non-performing asset and that limits the amount of money they can lend out.

It costs a bank thousands of dollars to foreclose on a home. They would rather take a discount on the mortgage and get that bad debt off their books so they can lend out more money. You are the solution for them. Banks need you to help them liquidate their houses so they can get rid of their bad debt. You are doing them a great service.

Ignore Trends In Real Estate | Homes for Sale in Acworth GA

You can learn just about anything on a particular subject through the internet. While access to information is usually a positive development, things can get a bit crazy if you get overloaded with it. Look long enough and you can find two pieces of information offering exactly the opposite views on a subject. Obviously, that doesn’t really help you make a choice.

In real estate, the information offered in the media is usually uniform. As a potential buyer or seller, how should you evaluate the information being produce in the media? The simple answer is you should ignore it. The problem with these reports is not the accuracy. Instead, the problem is they are reporting national trends in real estate. They don’t know about the growth in our area and how that impacts homes for sale in Acworth GA.

National trends are great and all, but they have little or no application to your specific area. Statewide numbers can even be inaccurate.  And the source of the information can be inaccurate also. For example, a nationally syndicated real estate site reports that Atlanta real estate home prices went up 16% in 2013, when they actually went up a median value of 36%! The latter statistics are from the Atlanta MLS which has the actual figures.¹ The only real estate trends that matter are those in your local markets, i.e., Acworth. Never rely on national data.

If you are considering buying, you have to be very careful when considering real estate trends. If it looks like a seller’s market in your area, you may make the mistake of not buying. Even in a seller’s market, buying a home is better than renting. Every day you are in the home is a day you are growing your personal wealth through equity accumulation. Don’t stay out of the market simply because you feel it isn’t the right time. As you look around the area, you see new homes being built. New home construction can impact the pricing of resales. New businesses coming in increase the demand for home inventory, and our area is seeing tremendous growth which in turn means it might be a great time to sell your home in Acworth.

It is easy to get caught up in real estate trends since they are plastered in front of your face on a daily basis. In truth, they really should not play much of a role in your decision making process.

 

Breaking into Home Ownership in Dallas GA

With the housing market becoming more expensive, buyers must look for the best way to find an affordable home. A fixer upper is a great way to affordably break into home ownership in the Dallas and Acworth housing market. Buying one away from the city is even more affordable since it is not a candidate for a teardown where the land is the most valuable asset.

If you are in the market for a new home, but do not want to spend tons of money or just can’t afford today’s rising home costs, you may want to look into buying a fixer upper. By purchasing a home in less than perfect condition you will be able to save yourself a lot of money. If this sounds like something you are interested in, you are in luck. There are thousands of homes available all over Atlanta waiting to be restored to beauty. All you need to know is where to look.

Listed below are the three most common ways that you can find a fixer upper in your area.

  1. The most traditional way of finding a fixer home is simply getting in your car and scouring the neighborhoods that interest you. By doing this you may not come across a lot of properties, but you may find the one that really catches your eye. If you do happen to find a fixer upper this way, make sure that you take down the address as well as the name and number of the real estate agent on the sign.
  2. Finding a home to restore can also be done by searching the classified ads. This is also a more traditional method of finding a new home. The best thing about searching for a fixer upper this way is that you will be able to search by location and price without ever having to leave home.
  3. And of course you can search for a fixer upper online. There are two ways to do this: you can either search a site that offers listings from a variety of different real estate agencies, or you can visit the site of each independent agency. Either way, you will be able to find a lot of details on any lower priced homes that may catch your eye. These sites offer information on pricing, as well as pictures of both the exterior and interior when available. By searching for a fixer upper online, you will ensure yourself of coming across the largest number of properties available in your area, and save yourself some time too!

However, it also pays to use a real estate agent that can spot major issues, advise you on what extra inspections you might want to consider and also will have a good contact list for reliable contractors and others you may want to consult with.

Overall, finding a fixer upper can be done in a number of different ways. Instead of overlooking this option, why not give it a try? It does not cost anything to look, and you may find out that a fixer upper is your ticket into the housing market or a way to gain a dream home.

Understanding REOs

 

If you are getting involved with real estate you may have heard the term REO without really knowing what it refers to and how it could play a part in your current or future investments. REO is actually just an acronym that stands for real estate owned by the bank. REOs aren’t all that common because the bank doesn’t want them, but they do happen and you can really cash in as a result.

How a Property Becomes an REO

When a bank forecloses on a home or property owner, it is required by law to hold a public foreclosure auction. Sometimes, because of lack of publicity or other reasons the home will not get any bidders at the auction, and the bank will end up owning the property. When the bank ends up owning the property it is then known as real estate owned by the bank, or an REO. An REO isn’t something that the bank wants, but many investors consider them gold mines.

Why the Home Wasn’t Bid On

There are a variety of reasons that a piece of property will become an REO. The mot common reason is that the property had very little equity in it. Many investors will not bid on a property that has less than 30% equity. In fact, statistics show that banks end up with most houses that do not have at least 30% equity. Many homes become REO when the property was simply in terrible condition. Most investors or individuals won’t invest in a home that is in poor condition because they see it as too risky. When a home that is in poor condition becomes an REO they are often gold mines waiting for the right investor to come along. Another reason that homes are not bid on at an auction is because there are IRS liens attached to the property. The problem with IRS liens is that there is a 120 period after the purchase of the home that the IRS has the right to take the property and refund the money that you have paid for it, but not the money you have put into the house updating it. For some investors, this 120 day redemption period is just too risky.

Why the Bank Wants To Get Rid Of REO’s

Banks do not want to own property, which is not what they are set up for. Basically, an REO is the sign of a bad loan that was given by the bank and the REO is a liability, not an asset. Every month that a bank owns a piece of property means they are losing money.

One of the biggest reasons that a bank does not want an REO is that their insurer will make them pay a full or partial settlement on the property. The bank is also aware that it doesn’t matter how much they sell the home for at an auction, they will probably suffer a loss. Banks are actually penalized for having too many REOs by the federal government, as they have to borrow funds from the government to stay in business. The federal government views the REO as a bad loan, and has a vested interest in making sure that a bank does not make too many bad loans. The bank will also have costs that are associated with the property such as taxes, insurance, sewer, water, and electricity bills, as well as homeowner association dues. The property must also be maintained and winterized, all of this costing the bank money.
Another problem for the bank is that it is not used to having to deal with the fixing and selling of property. Banks don’t have contractors and such on hand to do the repairs, so they are at the mercy of contractors that may charge them too much for the services due. It also takes time to make a house marketable, and all of this time they are paying the costs to upkeep the home, when they aren’t used to doing so. The bank will usually hand the big task of managing and selling an REO to someone that has another job, a more important job, and this will actually end up stressing out bank personnel until the home sells.

The bank will also pay to hire a real estate agent to sell the property once it has been repaired. While this may not seem like a big deal to most people, it can add up when the bank is expected to pay at least 6% of the sales price to a real estate agent for every REO! These costs really add up over time, so it’s plain to see why the bank simply does not want an REO.

Why Investors Are Attracted to REO’s

Most investors know that homes that need some work done to them usually are the biggest gold mines. Because of this, REOs are generally a very attractive business deal for these investors. The banks are willing to do just about anything to get rid of their owned property, which means that businesses or individuals can get the bank to make them a really nice deal so that they can buy the home, do the necessary repairs, and then sell the home if they choose, and still be able to make some money for themselves. For those that know how to do it right, there is a lot of money to be made in REOs.

REOs aren’t hard to find because banks want to get rid of them as quickly as possible, and advertise them to the best of their ability. Investors simply need to inspect the property to be sure it is something that they can repair and still profit from if they want to. Many homes become REOs because they are not in a desirable part of town, so the investor that is looking into an REO must be sure that the home is in a desirable part of town if they hope to get their money out of it.

Next Steps

Are you interested in REOs? Let us help you.

5 Things to Consider before Buying Investment Rental Property

Rental property can be an excellent way to bring in additional money as well as invest in an asset that is actually tangible; however, investing in rental property does involve more than just purchasing a property and watching the money roll in. Many people believe that the biggest hurdle they may face is obtaining the loan; however, this may be easier than they actually think. It is other issues which you may face along the way which should be considered before you actually take the step of purchasing rental property.

What can you afford?
First, always make sure you take the time to know exactly what you can afford. Many people make the mistake of overlooking this step, assuming that the rent will cover the mortgage payments. If you are not sure of exactly what kind of rent you can get before you purchase a property, you could find yourself in financial trouble later on. You should always research rental properties in your local area to understand the going rates for similar properties. Check the newspaper for information on going rental rates. It is also a good idea to check with your local landlord’s association for rental rate information.

Expenses
In addition, you need to take into consideration expenses which may come up along the way. Ideally, you should have a reserve fund established to tide you over in the event you experience emergency expenses or your property is vacant for a period of time. Before you commit to purchasing a property, make sure that you will be able to rent the property for at least an amount that will cover the mortgage as well as still have a sufficient amount left over to cover insurance premiums, maintenance costs, property taxes and income taxes.

Type of Property
In addition, you need to give some thought and consideration to the type of property that will best suit you. You can find rental properties in many different sizes as well as types. Each of these different types can pull in different rental rates as well as attract different types of renters. So, giving thought to the property that best suits you is really an important step which should not be overlooked.

Neighborhood
For example, if you purchase a property that is near a college or university you are likely going to find that most, if not all, of your tenants are college students. While you may never have a vacancy, you may also find that you have a continual turnover, problems collecting rent and even possible damage to the property itself.

Responsibilities
In addition, you should make sure you understand your responsibilities as a landlord. Keep in mind that your obligations are typically regulated by the state in which the property is located. Some states have very little regulation while other states are highly regulated. If you fail to follow state regulations you could find yourself in for quite a bit of financial as well as legal trouble. It is always best to educate yourself ahead of time.

Liability
Finally, make sure you consider how much insurance you will need to not only property the property in the event of damage or destruction but also to cover all liabilities as well. One liability claim can be enough to cause serious repercussions so this is not an issue where you want to take a short-cut. Remember that it is your responsibility as the landlord to provide liability insurance, not your tenant. If someone should slip and fall on your rental property then it will be you who is responsible, not the renter.

Rental investment property truly can be an excellent investment and income builder provided that you are prepared and understand what you should expect from the outset. Do not be afraid to seek help where you need it, especially from associations and from professionals such as attorneys. This is the hallmark that can often set a successful rental property investor apart from one who fails.

5 Things You Should Know Before You Flip A Property

Even though the housing market is recovering, there are still great investment opportunities available. But being an educated consumer can help you prevent making mistakes. Here are some tips to help you if you are considering getting into the “flipping” market.

Money is made at the buy, not the sell of your flip.

When flipping a house your money is made at the purchase not at the sell of the house. So, many times people buy a house with the intensions of making a huge profit only to find out that they could not make any money after all the renovations because the purchased price of the house was too high. When you purchase your property you need to be sure that you buy the house with enough money to make renovations, have carrying cost, and add about 5 $6,000. Now, cost is at $147,000, and that is if everything goes as planned. Profit is under 10,000 dollars. The mistake was made at the purchase at the home, not the sell.

Get an inspection on the home – get a complete inspection done on your property.

By spending a few hundred dollars ahead of time on this expense you can save thousands in problems that you cannot see. There are several types of inspections – foundation, pest, wood rot, etc. and by getting a full inspection you can usually rest assured that you know everything that is wrong with the property before it is too late. In the contract for the house you need to make sure that you have 7 days to have a inspection performed, and if the inspection finds problems that are going to cost more money than you are willing to spend, you can get out of the contract with no penalties.

Don’t do the work yourself.

Get a contractor or several sub-contractors and have the work done quickly and professionally. You need to have the house flipped ASAP, so that you can get it on the market and get it sold. Even though a professional will add to the cost of your home repairs/renovations, it will actually save you money in the end because it should decrease the amount of time you own the home. You do not have to spend all our time working on the property and instead will be able to spend that time looking for the next deal. 

Place the property 1 to 2% below market value

If you are wanting to flip real estate and make money the object is to buy and sell the property as quickly as possible, so that you can move on to the next house. If you purchase a house and try to sell it at top dollar to make an extra couple of thousand dollars on your flip, and end up holding it for 6 months you are losing money. Get the house on the market at a price that is going to blow the competition away, and providing you an opportunity for a quick sale. That is what you have to do especially if the market is slow.

Use a real estate agent

Do not try to sell you house on your own. Harness the power of a real estate agent and the power of the MLS system. When you do a FSBO you are depending on people driving by your house and seeing your sign, with a real estate agent you have someone actively marketing you house to get it sold. Once again this will free up more time for you to look for more great deals.

I hope this article has been helpful with the basics needs of flipping a house. But, do your homework before you purchase a house, and make sure that you can pull a profit on your deal. Then, make it happen!