Happy August! This month, we are going to answer a couple of really common questions when it comes to purchasing a new construction home. We’ve had a lot of clients buying new construction homes, and we want to make sure you’re prepared if you’ve been thinking about buying one yourself!
Purchasing a new construction house is usually more complicated and intimidating than buying a resale home. It is important with a new-home purchase that you hire a local real estate agent with new construction experience to represent you in this process. The advantages of having an agent help you purchase a new construction home can make the purchase process less intimidating because the agent has knowledge of the market and new construction products to help find the perfect home quickly, expertise in contract & negotiation, and closing assistance. The builder has a professional representative watching out for his needs, and you deserve the same expert representation.
Buying a new construction home is a little more complicated and time-consuming than buying a resale home. We can professionally guide you through this process and we have experience working with many national and private builders.
It is very important that your interests be professionally represented when you are entering into a contract for a semi-custom or build-to-suit home. We act as the coordinator for a team of professionals that you should have on your side in order to protect you and to ensure you get exactly the home you want! For example, new construction home inspection should be performed by an inspector that specializes in new constructions and include multiple phases. You may also want a real estate attorney to review the builder’s contract. Builders do not use the standard contract we use for resale. They each have a special contract written by their attorneys that may contain nuanced clauses for their advantage.
No. There is no financial advantage for you to buy directly from the builder. Builders have a “single-price” policy, meaning the price is the same whether your interests are represented by an Agent or not. They have to sell many similar homes in a community. They need to set and hold the price for sales and appraisal purposes. Just as in any resale, the Seller pays your Agent’s fee. This comes out of their marketing budget, not the sales department.
REMEMBER – Builders require that your Agent accompany you on your first visit to the Builder’s sales office, or they may not allow an agent to be added later as your representative. Call us first when you are thinking about buying a home, new or resale. We will make sure it is done right.
Until next month, take care!
– Yien and The Yao Team
Happy July! We hope your summer is going wonderfully. A classic topic that’s again very popular now is real estate investing. This month we will cover the concept and benefits of cashflow investing.
Q: I hear a lot about real estate investing. I also hear the stock market has done very well. I know you are an avid real estate investor. Can you share with me your perspective?
A: Certainly. I am financially conservative and appreciate secure investments. I invest in real estate by buying and holding homes long term, focusing on cashflow. To start investing, you must have savings. Saving is basically spending less money than you make. To save more, you can either make more money, or spend less. Making more is often not in our control, but spending less certainly is. Lifestyle choices determine this first step.
Once you have savings, you have to invest it. You cannot save to riches. With inflation, cash decreases in value overtime. You have to do something with your money to make it grow overtime. You worked hard for your money, you can make your money work hard for you.
Of course, there are many types of financial investment. Most of them are outside of my area of expertise. You should consult appropriate professionals regarding other types of investment. What I do know, is real estate. I’ve written about different types of real estate investments, including recently house-flipping. My personal favorite is long term buy-and-hold. The focus is on cash-flow.
When you buy and rent out a home, the rent you receive is the income. You pay expenses such as property taxes, insurance, HOA dues, maintenance and repairs. You may also have a mortgage payment or professional management fees. When the rent is more than all the expenses, you have positive cashflow.
In majority of financial investments such as stocks, precious metals, collectibles, cryptocurrencies, you only make money if the value of your holding goes up. If it does not, you lose money. There is only one outcome that will pay off.
It’s not the same with real estate cashflow investment. If you have a disciplined focus on cashflow, you are buying homes that generate more income than the cost to own. Even if the home value goes down, you have positive cashflow. And if the home value goes up, you have positive cash flow plus appreciated equity. This is the foundation of the security with cashflow investment in real estate.
Over the long term, real estate values have always gone up. I can sleep soundly at night and not worry about political changes, stock performances, or financial market fluctuations.
On this foundation, many important benefits of real estate investments are built. I have written about them in the past. For example, remember leverage. That is, you can borrow money to invest in real estate! You can borrow as much as 80%, there is nothing like it elsewhere.
I will stop here. In the future we will certainly discuss real estate investment again! Until then, take care.
~ Yien and The Yao Team
Happy month of June! As we enter another hurricane season, here is last year’s article on hurricane preparedness to get you refreshed.
Otherwise, this month we will talk about Home Flipping 101!
Q: I am very handy in doing home repairs. I am interested in learning about rehabbing homes and get into the home flipping business. Can you help me get started?
Certainly! We get asked quite often about how to get started in rehabbing and flipping homes. Many people have seen shows on HGTV about home flipping. These shows tend to be more for entertainment than education. They can create false expectations. What we will share here are from our actual experience of working with home flippers in Orlando. It may not be comprehensive, but it is accurate.
The general idea is to buy a fix-upper property below market value, renovate it, then resell it at a higher price for a profit. It is important to plan out the entire operation from the beginning. This includes finding the right property with sufficient margin, have a clear understanding of what work needs to be done and how much that will cost, and last but not least, know how much you will likely receive from the sale, which pays for the whole project and hopefully with a profit.
Let’s break this down step by step:
This should be your first consideration. You should be prepared to purchase with cash. True profitable flipping opportunities are usually with homes that need a lot of work. Homes in such condition are usually not financeable. That is, you won’t be able to find a bank that will lend you money because of its condition.
If a home only needs a fresh coat of paint and minor repairs, you won’t get it much below market value. So, understand that the best opportunity is with homes that others won’t touch. At the extreme, I’ve seen homes with water damage, mold issues, even fire damage turned into profitable flips. This need not be the case of course. Many profitable flips are with very manageable renovations.
The source of your funding can be your own money if you have the cash. Some clients use home-equity loans on their primary home to fund their flips.
Other clients use “other people’s money”. This includes an equity partner/investor who puts up the cash, a group of partners that pools their money together, and lastly, “hard money lenders” that make short term loans for home flipping, but usually at an interest rate above 10%.
In part, the availability of funding will determine the type of property you can flip. More money you have, higher price point you can go, and more ambitious project you can undertake.
A very important thing you must do with your real estate agent from the onset, is a realistic valuation projection of the finished home. That is, you need professional advice on what the renovated home will fetch in the current market. This is how you can calculate the acquisition price, renovation budget, selling expenses, and profitability. If the numbers don’t work out, skip the property. It is not the right one.
I’ve seen failed flips where the flippers did not consider the resale market. They presumed that as long as they added fancy improvements to the home, buyers would buy it. This can result in over-improvement. For example, if a neighborhood’s average sale price is around $250k, it may be difficult to sell a home at $300k price point, even if it’s nicer than the other homes.
This is where a real estate agent is critical to your success. You should have the right professional help in purchasing and selling of the product of your hard work.
This is the area that you may be most familiar with already. You can do the work yourself if you have the time and skill. Hire professionals if you don’t. It’s all about budget. Everything eats into the potential profit. Some flippers ultimately make money by employing themselves to do the renovation, others operate as contractors and coordinate various vendors. Staying on budget is critical.
This is an exciting step. You’ve completed your work. The once ugly property is now a beautiful home. Your real estate professionals can come in and do their work to stage and market the finished home. If everything is planned well, this is the realization of all your projections. Hopefully you will have the right buyer that successfully secures a mortgage and purchases this home!
This is a recap on running your numbers. The sale price minus the closing costs, renovation costs, and purchase price is your net profit. Remember that profit is a short-term capital gain, IRS will claim a part of that at year end.
In wrapping up, I want to mention another way of doing home-flips if you are not a professional flipper. Some people buy a fix-upper or outdated home, move into it, and slowly improve it over 2 years. Once the 2 years is up, they sell the renovated home and do the same thing all over again. This method allows them to avoid paying capital gains taxes. Because it is their primary home, once they meet that 2-year holding threshold, the current IRS rule allows tax-free gains of $250k for singles and $500k for married couples. Pretty nice right?
I will stop here. Please feel free to contact us if you have an interest to explore this further!
Until next month, take care and stay cool out there!
~ Yien and the Yao Team
Happy month of May! We are entering the early phase of the peak real estate buying/selling season in Orlando.
Back in February, we covered how to prepare your home if you are planning to sell. Then in March, we covered how to prepare if you are planning to buy. In April, we covered how to sell an existing home and buy a new one at the same time.
This month, the newest member of our team, Scott Callaway, will cover home financing 101! Scott came to real estate with over 30 years of financial services background. We asked him to discuss the role of mortgage in a home purchase.
Read Scott’s bio here
In today’s real estate market, you need to be in a position to have your offer accepted by the seller. You have probably heard the saying “Cash is King”. While that is true, a mortgage can be the next best thing if you are pre-approved by a reputable mortgage company.
A lot of questions always come up around financing. We’d like to answer two of the most common ones for you here.
The law allows for you to have your credit pulled any number of times during a 30-day period for the same type of request. Those requests will only impact your credit score as if you had it pulled once, so you can shop with ease during that 30-day time period.
As far as shopping is concerned you should shop around to find the lender you feel most comfortable with as well as being rewarded with the rates and costs that meet your needs. Start the mortgage process as soon as you begin looking for your new home, and always get a couple of quotes.
Keep in mind you want to get a pre-approval, not just a pre-qualification. The pre-approval is important because you are providing actual documentation and the lender is verifying your information. This way the only piece missing is the exact home you wish to purchase. Be sure to ask your lender how long the pre-approval is good for.
If you think about it there are really just 2 options with additional components as you identify what you need. These options are: Conventional and Government Backed mortgages (also referred to as Non-Conventional).
A conventional loan is one with a down payment more than 3.5%. A standard conventional is 20% down or more, while other conventional loans begin as low as 5% down. If you put down less than 20% you will most likely have to pay Private Mortgage Insurance (PMI). This PMI will add a little to your total monthly payment. This insurance allows you to get a loan without having to put as much down.
Government Backed Mortgages allow you to finance as much as 100% or even more depending on the product. VA loans will finance 100% while FHA loans allow for a 3.5% down payment and can stretch a little in regard to credit score and debt to income ratios.
The bottom line is determining how much you will put down and then ask your lender to make loan product recommendations. The partnership between your Realtor, Mortgage Lender and you is critical.
Remember the goal is to find your home, get your offer selected, and close on your home. Do not wait to apply. The knowledge of what you can afford may surprise you and lets you know where to begin your search. Whether you are a seasoned buyer or this is your first mortgage, you control the process. Let the lender earn your business.
As your real estate consultants, we are always happy to help answer any questions you have, and we know lots of reputable, trusted local lenders. We’d be happy to help you, please get in touch if you’re ready to start your purchase.
– Scott Callaway
Until next month, take care!
– The Yao Team
Happy April! We hope you have had a wonderful first quarter of 2019.
We continue to experience a lot of “lateral movement” in the market place. This is when a homeowner sells a home and moves to another in the same city, sometimes even in the same area. This is a sign of a maturing market because it indicates that homeowners feel it is both a good time to sell as well as a good time to buy. We have helped many families do this successfully.
After a number of years in the same home, some clients have new additions to their families and need a larger home. Some clients are empty-nesting or retiring so need to downsize. Some are relocating to meet changing work and lifestyle needs, while others are simply ready for something new.
Buying a home is a major task on its own, something that most people only do a few times in their life. Adding to it the task of also selling a home at the same time, and it can become very daunting. Often it is difficult to make a change without knowing how it can be done.
We have helped many clients successfully make their lateral move. No two situations are identical. We custom-tailor plans depending on each family’s unique circumstances. Here are a few ways that a lateral move can be approached:
For most, the preference is finding the new home first. That is the main driving force for the move after all. There are many advantages to going this route. For clients who were able to purchase first, they moved into the new home and turned the vacant old home to us to market and sell. They didn’t have to deal with preparations and showings. This is the easy route. However, this requires having the funds to purchase the new home, or the ability to qualify and carry two mortgages for several months.
For many, the selling of the current home must happen first to obtain the proceeds for the purchase of the next home. This can be done several different ways, such as:
Achieving contracts on both the buying and selling side and coordinating same-day closings. This is one of the most complex maneuvers in residential transactions because many things involving multiple parties must align flawlessly.
b. The use of short-term housing and storage to bridge the duration between the selling and the buying.
c. Negotiate a lease-back from the buyers after selling. This can happen when the new owners do not need the house right away and actually appreciate receiving rent vs. having the home sit vacant.
There are many more permutations of how lateral moves are accomplished. It’s helpful to have the same agent involved in both sides of sale contingency transactions to oversee the process in its entirety. Despite the difficulty of lateral moves, our team has the experience and capability to handle these transactions and have done so many times over.
Give us a call for a personalized consultation. We will discuss the best strategies for you!
Until next month, take care!
~Yien & The Yao Team
Happy March! Spring is just around the corner, and so is the peak real estate season in Central Florida!
Last month we talked about ways to start preparing to sell a home. This month, we’re going to focus on what potential buyers should be doing now to prepare to purchase a home this summer.
Here are our 3 best tips to start getting ready now for your future purchase:
1. Organize Your Finances: This is the most important step. You can’t buy a home if you cannot qualify for a loan. We can recommend reputable local lenders that will provide the right guidance. You may need to save more money, increase your credit score, or improve your debt-to-income ratio. Do not make large purchases at this time. Be proactive about this, have a plan and goal before you start looking at homes.
2. Review Your Current Lease: If you are currently renting, make sure you understand your rental lease. Know when it ends so you can try to time your purchase properly. If you need to break your lease early, make sure you have a clear agreement with the landlord first and know how much it will cost.
3. Prioritize What You Want: In the current low-inventory market, you may not get everything you are looking for in a home. We will explore areas and home features with you based on your needs, budget, and preferences. But it’s good to think about your priorities in a home. This means knowing what you are willing to sacrifice if a 100% match isn’t available. This is personal and different for every buyer. For some, the location is paramount. For others, certain home features, such as a pool, is a must. Knowing your priorities allows flexibility in your home search and may help you achieve success earlier!
If you have questions or would like personalized guidance, we are always here to help!
Until next time, take care!
Happy February! We can hardly believe the first month of the new year is already gone! We hope you’ve had a great start to the year and are well on your way to accomplishing your goals.
If your goals include selling a home this year, then this list is for you!
As you probably know, the Orlando market is very seasonal, and real estate sales really heat up during the Spring-Summer seasons. For this reason, many sellers try to list during these peak months. If you want to sell quickly, for the highest possible price, then now is the time to start preparing your home! The following are our best tips for things you can start doing today to prepare your home for the market.
This is the time to catch up on “deferred maintenance”. If your exterior walls show color deterioration, visible mortar lines, or feel chalky to the touch, it is time to repaint them. If your carpets are old and worn, you may want to replace them. Basically, to achieve the highest price for your home, you want it to appear well maintained and move-in ready. Anything you don’t want to bother with fixing, will be fixed by the buyers of your home eventually. But it will be reflected in the sale price. Our experience indicates that buyers frequently deduct 2-3 times the actual cost of many repairs to account for the unexpected.
Do you have unusual paint colors you know is a personal preference and may be an “acquired taste”? This is the time to neutralize those colors. Do you have outdated features or fixtures? If they are inexpensive we may recommend that you update them. For example, the older round bulbs in bathrooms, aka “Hollywood lights” can be inexpensively replaced with modern light fixtures. Sometimes, more expensive upgrades may be worthwhile before putting your home on the market. For example, if you have outdated Formica kitchen/bathroom countertops, you may get full return or more for your investment if you upgrade to granite or other more popular countertops.
There are probably some pieces of furniture and other items in your home that you are tired of. There’s no reason to move them to a new home, just get rid of them now. Also, pack up as many personal items as you can. It can be difficult for potential buyers to picture themselves in the home if it is full of your family photos and memorabilia. Remember: less is more.
Overgrown landscaping? Time to trim it back. Dead patches of lawn? Time to fertilize and water. Weeds in the flower bed? You know what to do. Save re-mulching until right before listing your home, that will give the front a fresh look for photos and showings. Also, a good power wash of the front walkway and driveway can do wonders for the impression of your home.
We can help you look up the permit records for your home. If there are open or expired permits, you can work on closing them out before listing the home so they will not cause issues or delays during the contract.
Of course, this is not an exhaustive list. It is always helpful to give us a call first. We can evaluate your home and prepare a detailed, customized plan to prepare your home. We can even provide resources to help you get the work done. Check out our Neighbors in Business list to help get you started!
Until next time, take care!
|
Happy December! It’s that time of the year again. We want to wish you a very happy holiday season. Whatever tradition you celebrate, may it be filled with joy, warmth, and goodwill.
As our team reflects on this year, we are full of gratitude. We want to thank you for your trust and support again this year. We helped 70 families with their home purchases and sales this year. In 2018, our clients have upsized, downsized, bought a first home, relocated, retired, bought an investment property, or sold an investment property.
Whatever the purpose and reason, we are honored to have been a part of the journey. Each and every journey we took with our clients was special and memorable in some way. We are grateful to have been entrusted to be the guides in achieving your real estate goals. We hope our sellers are enjoying the next chapter in their life’s journey, and our buyers are enjoying the wonders of homeownership.
Looking back at 2018, the Orlando real estate market continued to be healthy and stable. It’s been a good year for both buyers and sellers. Sellers have seen steady growth in their home values, while buyers have been enjoying the continuance of low interest rates. Although overall inventory has been a bit lower this year, the market has remained very stable in terms of number of home sales. Check out this year-over-year comparison:
For the most recent Orlando Market Report, Click here for a short video summary:
Please feel free to reach out to our team with your questions about anything real estate related. We are passionate about real estate and spend much of our time as a team discussing the market. We will always be here when you need us. If buying or selling real estate is in your near future, give us a call.
Stay tuned for the January 2019 Orlando Real Estate Journal. We will share with you the outlook for the new year along with real estate investment ideas.
We sincerely wish you a truly wondrous holiday season. May you enjoy the fruits of your labor and the warmth of loved ones in the remainder of this year.
– Yien and The Yao Team
|
We will be contacting you shortly.
