What Should I Know Before Investing In Real Estate?

Are you thinking of investing in real estate in the Fort Myers or Cape Coral areas?

While you can’t control everything, it helps to know what you are getting yourself into and actively prepare yourself to execute a sound investment.  If you are new to real estate investing, here are ten nuggets of wisdom that can help you prepare for success.

10 Things to Know Before You Invest In Real Estate

  1. Understand Your Risk Tolerance – As the famous Greek adage says “First Know Thyself”. If the idea of losing money gives you a migraine, then you need to direct yourself to lower risk investments. Outline how much money, time, and effort you can realistically and willingly dedicate to investing, then respect your own thresholds.
  2. Pick Partners Carefully – The number one destroyer of marriages, family relationships, friendships, and partnerships is money. Make sure you have a clear agreement on acceptable risk and losses with people involved in your investment.  Choose people you can stand to work with even in stressful times and that you can trust implicitly in prosperous times.
  3. Assemble A Team – Even if you are venturing out as a solopreneur, you really cannot do it all on your own. Before you get started, build a solid team including a Lender, Contractor or Handy Man, Tax Professional, Attorney and a Realtor.  If possible, find a mentor who has experience in the type of investing you want to do.
  4. Write Out A Plan – Avoid making it up as you go along. Decide what type of investment you want, how the numbers work, and who will be on your team.  Map out the investment like a project and carefully track time and expenses.  Always be realistic about the amount of time and funds you can sink into an investment.  Finally, be sure to have an exit plan.
  5. Taxes Make A Difference – An investment can seem profitable until tax seasons comes around and you are paying thousands in capital gains and other tax obligations. Keep in touch with the tax professional on your team and make sure you know the tax outcome of every potential investment you consider.
  6. Always Run The Numbers – Buying a home to live in is usually an emotional purchase. Investing in real estate is a decision based on numbers.  Carefully examine expenses, investment capital, tax burden, and even the cost of failure associated with the property before fronting your money. If the numbers don’t work, walk away.
  7. Keep A Tight Schedule – Time really is money in most real estate investments. In many types of investing, such as flipping a home, the longer you hold a property, the higher your expenses.  Conversely, in some cases holding properties long-term allow is better.  In addition, there are deadlines for inspections, payments to lenders, etc. that need to be carefully managed.
  8. Find Your People – Many cities have a Real Estate Investors Association. This is a great place to meet mentors, take workshops, meet qualified service providers, and even build partnerships.  Use Google to find associations in your area or try finding a group on Meet-Up.  These groups are also a great way to get plugged into local trends.
  9. Be Aware That Markets Have Cycles – Tune in to the local real estate market where you intend to invest. Many people made lots of money investing between 2003 and 2005.  By 2007, there was no more easy money and many “late-to-game” investors lost their money, their good credit, and in some cases even their own homes. Pay attention to the market.
  10. Know When to Fold – Just as our own homes can become money pits, so can a real estate investment. When a loss is becoming overwhelming, sometimes the right answer is to walk away. The same applies when you are making a lot of money.  Avoid getting complacent, taking on too much risk, or failing to enjoy the wealth you are accumulating because you are working too hard.

Real Estate is considered one of the most reliable paths to building wealth.  If you decide to venture into this diverse and exciting world, be sure to follow these 10 guidelines.  Remember, make a plan, not a bet!

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is The Debt-To-Income Ratio (DTI)?

What Is The Debt-To-Income Ratio (DTI)?

 

Starting the home buying process in the Fort Myers or Cape Coral areas? One term you may hear your lender use is “DTI” or Debt-To-Income Ratio.

Measuring your existing debts against your existing income is one part of a lender’s required assessment of your ability to repay a loan.

Like the video says:  debts are existing financial commitments like a car payment for example, whereas a grocery bill is not.

To calculate your debt-to-income ratio add up your monthly debt payments and divide them by your GROSS monthly income. (Gross income is generally the amount of money you earn BEFORE taxes and other deductions.)

The Federally-established debt-to-income target is a maximum of 43% for Qualified Mortgages.

If your ratio is higher there may be other loans available  – however, there may also be additional questions to establish your ability to repay, and the rates may be different than those available for Qualified Mortgages.

Studies suggest that a high debt-to-income ratio puts a homeowner at greater risk of challenges making monthly payments. So consider your situation and risks carefully before exceeding that suggested ratio.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: Should I Sell My Home?

Should I Sell My Home?

Are you currently living in the Fort Myers or Cape Coral areas and wondering if you should sell your home right now?

It seems like a simple question, yet ask 10 people and you will likely get 10 different answers. Within real estate markets there always seems to be so much conflicting information. Plus, everyone thinks they are an expert! Even people who have never owned a home suddenly have profound real estate insights to share. With all the confusion, how do you decide if selling your home is the right move?

Let’s be clear on a fundamental truth, the decision to sell your home is a deeply personal decision. Naturally, factors such as market conditions, equity in the home, and your financial situation are factors to be carefully weighed. Ultimately, you need to do what feels right for you and your family even if the market stars are not aligning perfectly. There are always great reasons to sell your home and we are going to share three of them with you.

You Need More Space

This is one of the most common reasons for selling a home. Single individuals and young families often buy a “starter home”. These tend to be affordable, small homes that fit a first time home buyer budget. Over time, there is a need for more space. A single adult may have more furniture, want room for guests, adopt pets, or get engaged. Young families may need more room for kids that are older and need their own space, to accommodate more children, or to make space for a beloved elderly relative.

“Moving Up” to a bigger house can be exciting. Imagine not having to share a bathroom with the kids or with guests? A bigger home can provide a lot more than more bedrooms and bathrooms. You may gain a garage, a bigger backyard, a finished basement, larger entertainment areas, and…a full sized kitchen with a pantry. Divine, right?

Beyond the changes in daily living, a more spacious home can offer a delightful change of lifestyle. Your new, larger home will likely accommodate guests more comfortably, especially for extended family visits. Instead of cramped dinner parties, you may host events that flow between spacious rooms and outdoor areas. Your new home may even become the family favorite for celebrating holidays!

If the thought of dozens of people walking around your house gives you anxiety, remember, you don’t have to host guests! Whether you invite people into your space or not, a bigger home gives you a lot more space to enjoy. If you are not into having guests, that spare bedroom can become an office or a beautifully appointed library. Your days can be filled with light, air, and silence – all in a spacious home that is all yours.

You Need Less Space

Oh, we can wax poetic about the joys of a dedicated laundry room, but we recognize that not everyone is looking for more space. The opposite may very well be true. You may find yourself at the stage in your life when the big house is more hassle than comfort.

“Downsizing” can be equally as exciting as “upsizing”. There are so many options ahead! Whether it’s a cottage on the beach, a high-rise condo in an urban area, or even a well-appointed apartment in a retirement center, shopping for a smaller home can be an adventure.

If you are truly adventurous, you may even decide to try a Tiny House. These small, portable homes are typically hand-built and can be “parked” on designated lots, backyards, tiny home communities, and more. Providing between 100 to 500 square feet of living space, these homes comes with a crash course in economy of space.

Yet tiny homeowners love it. They can build their house to their own specifications with many features of the home serving double duty. Everything has its spot and there is a designated spot for everything! It’s not for everyone, but those who have adopted the lifestyle often talk about the incredible feeling of freedom that comes with living in a tiny house.

Sea-side living, urban dwelling, senior communities, and tiny homes are all great options for enjoyable housing solutions once you sell your home. Many individuals who downsize report a feeling of “lightness” once they let go of all their “stuff”. Regardless of where you downsize to, take the time to evaluate what needs to go and what keepsakes need to adorn your new, streamlined world.

You Need a Change of Venue

Sometimes it’s not about more space or less space, it’s about different space. If you have spent all your life in quiet country living, maybe you are craving the faster heartbeat of city life. Or conversely, maybe urban life has worn you down and small town life is calling. You need a change and the one thing you can’t take with you is your home (well, unless you own a tiny house!).

Renting your home to tenants may be a reasonable solution, but often a permanent change of venue requires selling your home. The proceeds of the sale may support your move and fund a whole new life. In some circumstances, the financials are a not a factor and selling the home is more a symbolic “letting go” that allows you to fully embrace your new adventure.

Make sure you are prepared for the logistics involved in selling your home to move away. You will need to decide whether to stay in the home until it’s sold or to go ahead with the move and leave the home vacant to sell. Both are viable options that require planning and patience.

If you stay in the home, you will likely need to stage it for sale. Be prepared to have buyers viewing the home and to accommodate open house events. If you move, you need to ensure you can financially maintain two residences and that you have excellent communication with your real estate team. Either way, remember the sales process is only temporary and eventually you will be fully rooted in your new home.

Embrace the Sale

Regardless of your reasons for selling your home, relocating can be immensely exciting. Not only do you gain a new place to live, you will likely have a new job, meet new neighbors, and build new friendships. New places can bring wonderful new experiences and introduce you to exciting new cultural vibes – enjoy it!

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is A Mortgage?

What Is A Mortgage?

 

Are you looking for a mortgage to buy a home in the Fort Myers or Cape Coral area?

The original phrase “mort gage” translates as “death pledge”! But as this video explains, a mortgage is a loan obtained to purchase real estate.

The “mortgage” itself is a lien – a legal claim on the home or property that secures the promise to pay the debt.

All mortgages have two features in common: principal and interest.

The principal is the amount you are borrowing which is “secured” by the lender’s claim on the property.

The interest, usually stated as the percentage rate is the additional amount paid for borrowing. Mortgage interest is ‘compounded’ – interest on interest, over time.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is A Counter Offer?