Why Now Is The Time To Buy Scottish Real Estate

Scotland’s decision to stay in the United Kingdom will drive growth in the local property market. Both sellers and buyers had been sitting on the fence for the past 18 months, but look set to return in large numbers.
As a result, local realtors expect a marked increase in activity, especially at the upper end of the market, which has traditionally been fuelled by wealthy incomers from England and abroad.
All forecasts point to a rise in local housing values across the next few months, followed by another one in 2015 and by further rises in the next five years. This means now could be a very good time to bag a Scottish home, before the price tag goes significantly up—so here is a selection of great Scottish properties currently available for sale.

Source: http://www.forbes.com/sites/carlapassino/2014/09/19/scotland-no-vote-why-now-is-the-time-to-buy-scottish-real-estate

5 Habits of Self-Made Millionaires

1. Snowball Your Money

People who end up very, very rich, think of money as material.  It’s not, first and foremost, the gateway to wacky hijinks or to excess.  Instead it’s a tool for building more money.  Millionaires look for the kind of money that allows them to safely do what they want , sums large enough to pass on to the kids, to amount to power and independence.  It’s not about getting just enough money to buy some fun and fine things.
Therefore, millionaires begin putting money away as soon as they can, a bit more aggressively than others, investing in funds more than just opening savings accounts, engaging in more and more risk as the snowball effect kicks in.

2. Ride The Wave of Uncertainty

Steve Siebold, author of How Rich People Think,” says, “Physical, psychological, and emotional comfort is the primary goal of the middle class mindset,” In other words, people with middling incomes who stay that way have comfort and safety as prime goals—they’re not achieving great riches because they are afraid to try, feeling it would be a shame to lose a decent position in life due to a failed business or a bad investement.
The goal of those who become ultra-rich is to do so.  They aren’t attempting to be sure not to suffer in any way, not to have to ride out waves.  Self-made millionaires don’t get there just because they think it’d be fun; rather, they earn it by dealing with great uncertainty.  Yes, they sometimes fail, but they know how to pick themselves up afterward, rather than feeling only the need to regain some certainty.

3. Choose Not to Choose

We’re taught about yin and yang and about making priorities.  If you want to become very rich, you’ll have to sacrifice time with your family.  Or perhaps it’s idealism or part of your soul or peace and quiet, or time for church.  To some extent, this relates to the desire for comfort—the average person wants to be able to comfortably find balance.
Those who go on to be millionaires find a way to accomplish that which others would find impossible—it may involve rushing around, deftly juggling schedules, paying people to do certain tasks, but they do the things other people don’t have the stomach for.

4. Money Isn’t For Money’s Sake

Any good card player will advise to think of the chips as chips not as real money.  Even if you’re at a buddy’s house with actual money on the table, think of what you’re betting as a game piece—if you think of actual cash value, you’ll get too conservative, which can mean making the wrong moves.
Similarly, while self-made millionaires do wish to be very rich, they’re not thinking of the money itself.  As I mentioned above, they think of money as a tool—for freedom, choices, not having to be beholden to others.  For many ultra-rich, money isn’t for many small things like shoes and mp3 players, but fewer big things like voyages around the world, homes, and perhaps that pro sports team they’ve always wanted.

5. Hang Out With Millionaires

Being around other millionaires, of course, encourages networking and opportunities.  But it also gives one the chance to see for themselves the habits I’ve been describing.  It will give one a chance to emulate people in a way that will lead to success.

Source: http://frugalentrepreneur.com/2014/09/5-habits-of-self-made-millionaires

It takes money to make money

The rich get richer -- and own more stocks, the Federal Reserve reported today in its triennial report, the Survey of Consumer Finances.

The lengthy report charts the changes in family finances from 2010 to 2013 and not surprisingly most American families did not experience a sea change in their fortunes.

Stock ownership rates did not increase as values rose, according to the report. The number of Americans who own retirement accounts also fell over the past few years, down to 49.2 percent in 2013 from 50.4 percent in 2010. The The median value of the accounts jumped 25 percent during that time.

Here's a few more of the central bank's findings about investing:

• Rates of direct stock ownership fell 1.3 percent from 15.1 percent to 13.8 percent over the time period, though the median value of the stock market gained 26 percent.
• Combining indirect stock ownership rates -- for instance owning stocks in mutual funds -- with the number of people who own stocks directly, paints a similar picture. Direct and indirect holdings of stock fell from a peak of 53.2 percent in 2007 to 48.8 percent in 2013.
• Proving the adage that it takes money to make money, overall stock ownership rates increased 3.9 percent for the top 10 percent of income earners. For the bottom half of earners, the three years between 2010 and 2013 saw already low levels of stock ownership further eroded.

A survey released by Bankrate in April found that Americans are still unsure about the stock market, despite historically low yields on savings accounts and certificates of deposit. Only 22 percent of those polled said they were pushed toward the stock market as a result of low interest rates.

Do you own more stocks or mutual funds now than in 2010?

Source: http://www.bankrate.com/financing/investing/it-takes-money-to-make-money

Top 5 Reasons To Be An Investor Right Now

So I ran across this great article on Realtor.com last month. It was geared towards homeowners and explaining why NOW is the best time to a home. But after reading the article I came to the following – OMG – these are compelling reasons for INVESTORS to get into wholesaling and rehabbing investments deals – NOW! Here is the article that I read and see for you self why you should be actively real estate investing:

Five Compelling Reasons to Buy a House Right Now

“Buying a house is a highly individual decision—and a local one—but current trends are creating a favorable situation for many would-be homeowners. Interest rates are low, employment is rising, home prices—in most markets—are still well below their peaks, and rents are through the roof. Every family and each individual has various factors affecting the ability and the decision to buy a home. If you live in a market where studio apartments are $2,400 per month—while nearby condos sell for $300,000—it might make sense to buy a house instead.

1. Interest Rates Are Still Low

Mortgage interest rates are still low—for now.
A 30-year-fixed-rate loan now averages 4.16%, according to Freddie Mac, but many economists believe we will see 5% rates next year. As interest rates increase, so do your monthly payments.
A $300,000 house at 4.16% with 20% down would have a monthly payment of $1,168. With a 5% interest rate, that payment increases to $1,288.

2. There’s More Inventory

As more houses enter the for sale market, prices stabilize.
“Inventories are at their highest level in over a year, and price gains have slowed to much more welcoming levels,” said Lawrence Yun, Chief Economist at the National Association of REALTORS®.
The upside is consumers now have more choices, if they are looking at existing homes.
New homes are another story: Yun says new construction needs to double its current production to meet market demand.

3. Home Prices Are Going Up

Home prices are rising.
The median price of an existing home was $223,300 in June, or 4.3% higher than June 2013. That’s the 28th consecutive month of year-over-year price gains, and economists expect that trend to continue. However, we are still at least 20% off the peak prices of 2006.
“Attempting to buy a home when the market is at its lowest point—or to sell at the peak—is tricky,” said Jonathan Smoke, Chief Economist for realtor.com®.
He compares it to trying to time the stock market.
“You might get lucky one or two times, but overall, timing the market does not work,” Smoke added. “It all points to purchasing power, and that’s a reflection of price and interest rates, which will both be higher in the future.”

4. Rents Are Sky-High

If you live in a big city, then you know rent is astronomical. In San Francisco, many people are spending 42% of their monthly income to pay the rent. Nationwide, rents are rising at a 4% annual clip.
It’s not unusual to see adults rooming together in expensive cities like New York, San Francisco and Chicago, but everyone needs his or her own space at some point.
Buying a home would lock in your monthly payment and stabilize your finances with a fixed-rate mortgage. This is, of course, assuming you don’t live the San Francisco area, where the average price of a home is $1 million.

5. Employment on the Rise

Perhaps nothing is as important to the financial stability you need to buy a home as steady employment. The U.S. economy is finally adding jobs—about 200,000 new jobs per month.
The next generation of home buyers—the Millennials—has been particularly affected by the nation’s job slump. Saddled with student loans and tight lending restrictions, many in this generation have been living with their parents to save money until the economy picks up.
If your employment prospects look good these days and the other four factors check out, then it may indeed be the right time for you to buy a home of your own.”

Source: http://www.reiclub.com/realestateblog/top-5-reasons-to-be-an-investor-right-now

Saving isn’t enough to retire

Good morning Dinks.  Let me ask you a question, how far away are you from your retirement date?  Some of us may want to spend our lives flourishing in our careers and plan to retire at 65, some people want to work hard and retire early at 55 and some of us save every single penny to take our retirement as soon as possible, maybe even in our 40s.  So which one are you?

Are you saving or planning for retirement?

A lot of the books we read and advice we hear tells us to save, save, save for retirement.  But what if saving isn’t enough.  Well it’s not.  We can’t just blindly save for retirement because money is only a part of retirement.  The truth is retiring – at any age – takes planning and the dollar signs is only one aspect of the plan.

Actually I should say that the amount of money you need in retirement is the final outcome of four other contributing factors.  Before you start saving for retirement you need to know what you want to do, where you want to go and how you want to live when you retire.

Income vs. lifestyle in retirement

The truth is a lot of people don’t see retirement as a planning process, especially older generations.  My parents didn’t.  They worked, supported a family of four and saved whatever extra money they had.  My Dad’s employer offered an employer-sponsored pension plan.  Once his total age plus years of service equalled 85 he could retire with a full pension.  This is the only goal my Dad worked towards his whole life and just as planned he retired at 55 years old and has never looked back.

My Dad didn’t know how much he needed to support his lifestyle in retirement because he didn’t know what he wanted to do, all he knew was that he wanted to retire as soon as he could because he didn’t want to work anymore.  Now my Dad’s lifestyle is based on his income, not the other way around.

Set realistic retirement goals that you can afford

Your retirement goals need to reflect your current income as well as your projected needs during retirement.  This includes things such as where do you want to live, how do you want to live, what do you want to do in your spare time and what type of lifestyle do you want to have during retirement.  Once you determine the type of retirement you want to have you will be able to figure out how much you need to save.

You will need to save a portion of your current income to help support the lifestyle you want in retirement.  If you set unrealistic retirement goals that you can’t afford to support you will end up not saving anything and that’s not good.  I would love to live on a yacht in the South of France when I turn 55, but that’s just not realistic because my current income won’t allow me to save for such an elaborate retirement goal.

Source:  http://www.dinksfinance.com/2014/09/saving-isnt-enough-retire

Remember Your Investment Horizon

When the markets start acting crazy, remembering your investment horizon puts everything back into perspective. Fears in Europe, the economy, unemployment, and a few hundred other data sets all add to the daily swings of the market. But you can lower your risk to these issues by building your portfolio around a strict investment time horizon.

So are we heading for a repeat of last year? Or are the recent headlines another gut check for every investor out there? More importantly, should it really matter?

All that noise breeds a shortsighted view of your money. What is different today that affects your investment risk? The answer should be “Nothing” if your portfolio is built around your investment horizon.

Focus On The Plan

When you invest, there’s a plan of attack. It should be based on your goals over the next few months, years, and decades. Your plan stretches from tomorrow till your final retirement years. Breaking those goals down – from groceries next week to college for the kids, then your retirement and beyond – gives you an investment time horizon. This timeline tells you how long you’ll hold each investment.

Knowing this, you can manage risk easier by matching your portfolio against your time horizon. As you look across your timeline, the investments should go from low risk to higher risk the further you go out.

A basic investment horizon can be broken down into three buckets: short, medium, and long-term. As the years go on, each time horizon naturally shortens. Here’s the basic investment guidelines for each bucket:

• The next 3 years – You shouldn’t take on risk with these short-term investments. Stick with savings accounts, money market accounts, and CDs.
• The next 4 - 10 years – You can take on risk, but not too much risk in the medium term. Stick to a conservative mix of bonds and stocks for this investment horizon.
• Beyond 10 years – You can take more risk over the long-term. Stocks can make up a bulk of these investments with a small portion in bonds.

Understanding your investment time horizon lets you overlook the short-term risks of the market. The next time the S&P 500 drops 20% (and your knee jerk reaction is to sell) you can rest assured that your short-term investments are protected, while your mid to long-term allocation can handle the change. When you put it altogether, it means less day-to-day worry.

Your Investment Horizon Will Change

Every year, you’re another year older and your investment horizon changes. Life changes. That’s why you do regular rebalancing and annual reviews. Each rebalance automatically adjusts your portfolio to the risks of time. As your timeline shortens those investments become less risky because your portfolio slowly moves from growth to preservation of wealth.

Take Advantage of the Drops

For those in the early stages of their timeline or who can stomach more risk, your cash holdings have a dual purpose. It’s insurance for when things go south but it’s a growth engine too. Having cash on hand is a comforting thing. But when you have a job, income, and the bills are paid that cash has better uses.

When the market falls again (and it will) in the short-term, take advantage of it. Put that cash to good use. You take advantage of products when they go on sale. Why wouldn’t you do it with stocks and bonds? Use that buying opportunity to boost returns and compound your long-term growth. Until then, focus on your time horizon.

Source: http://novelinvestor.com/investing/remember-your-investment-horizon

How to Measure Risk

Investing in stocks is a risky business. There are some risks you have some control over and other that you can only guard against. Thoughtful investment securities selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

However, other risks inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

There are two ways to measure risk. One is by using modern portfolio theory and the capital asset pricing model and the second is to look at the various risk factors which affect a business.

Capital Asset Pricing Model

We will not discuss in detail this theory of asset pricing as it requires you to have a working knowledge of first or second year university level statistics and finance. Since this is an introductory article, readers who are interested to learn more about the CAPM and Modern portfolio theory are encouraged to attend a course in finance or seek advice from a qualified advisor.

Basically, the CAPM makes some major assumptions about investors and their preferences. In order to use the CAPM to find the proper discount rate, one must know three things: a stock's beta, the nominal risk free rate, and the expected return on the market. Stock's with betas greater than one are more risky than the market and betas of less than one are less risky. For example, a stock with a beta of 1.5 is expected to gain 1.5% when the market rises 1%.

Modern portfolio theory is also where the main ideas about diversification come from. We will look at this concept in more detail later. For now, we can define a diversified portfolio as containing securities which have little or no correlation to other securities in a portfolio or the market. These securities are then placed in a portfolio in such a way as to minimize the volatility of the portfolio.

You may be scratching your head by now but this is essentially the basic concept of diversification and minimizing risk. There are a lot of disadvantages and advantages to using the CAPM and MPT. One assumption of the CAPM I will mention is that there are two types of risk. Market risk and firm specific risk. The CAPM assumes that investors only get a premium return for taking on market risk because the firm specific risk can be entirely eliminated through diversification. Thus, beta only measures market or nondiversifiable risk.

Second Way to Measure Risk

The second way to measure risk is to start by taking a nominal risk free rate. How do you do this? Well you take the yield that is currently offered on US Government bonds that match your investment horizon. For example, if you plan to invest for 5 years, you should use the yield on 5yr U.S. bonds. Now add to this the premium for risk and voila-you have your required return or discount rate. You may be asking, what makes up the risk premium? Well, remember from lesson one there are five things: financial, business, liquidity, foreign exchange, and political risk.

Financial Risk:

Financial risk involves a company's capital structure. What is their debt/equity? What is their current ratio? etc. We will look into how to assess financial risk in greater detail later in lessons on accounting and financial statements analysis.

Business Risk:

This involves the economics of the firm you are looking at. Ask yourself, how will this company look ten years from now? Do they have barriers to entry? (ie patents, economies of scale etc. more on this in the economics lessons).

Liquidity Risk:

It has been shown through various studies that firms which are private or thinly traded are sold at a significant discount to their value compared with similar firms with active markets. Firm's which can be easily bought or sold with little transaction costs are called liquid or marketable. The lack of liquidity can occur if the stock you are researching is not widely followed. It can also happen if you plan to liquidate a large block of stock. Your transaction could bring down the price significantly.

Foreign Exchange/Political Risk:

This involves firms which derive significant portions of their sales overseas. For example, many exporters to Asia have been affected by weaker demand for their goods. Foreign Exchange/Political risk can also happen because the company you are looking into is heavily restricted by the government. Finally, different countries have different accounting rules so you should be aware of this when investing in foreign stocks.

When investing in foreign stocks, you also run the risk of the U.S. appreciating. To adjust for this, you should restate your foreign returns to U.S. returns.

Source: http://www.everythingaboutinvestment.com/2012/01/how-to-measure-risk.html

Real Estate Still UK's Largest Investment Asset Class

As a result of budgetary changes in March 2014, more pensioners are investing in residential property as part of their pension pot than ever before.
Drawn to the asset by the fact that real estate has shown to be the best performing asset over the past 30 years, pensioners are exercising their freedom to choose investments that will generate the healthiest income in later retirement.
With life expectancy in the UK at an all-time high and rising annually, pension pots have been running out prematurely and not providing the income expected which has made retirement financially difficult for some.

Real Estate Out-Performs Other Asset Classes Year-on-Year

However, since the changes increasing numbers of savers have been seeking alternative forms of investment to fund their retirement. Property investment has provided many retirees with a secure source of regular income and has removed the risk of funds running out during retirement.
Residential property has proven to be an asset that out-performs every other asset class consistently year-on-year. Property also grows in value over time and as such, makes the perfect investment to hold on to for as long as possible. An asset like residential property will provide a much stronger, more secure income over the course of retirement.
British pensioners have also been increasingly turning towards equity release which allows them to raise funds on their property without moving home, freeing up capital to re-invest in residential property and increase their income during retirement.

Property Prices Driven by Owner-Occupier Market

A key attraction of residential property to long-term investors is that the income stream from housing is linked to wage growth and can offer investors an even better hedge to their liabilities than commercial property which is more closely linked to the slower growing retail price growth (RPI) and other property market indicators.
There are also more bargains to be had with residential investments as they are generally sold at a discount to vacant possession value. This represents the amount that would be achieved if the property were sold vacant on the open market to an owner-occupier.
In other words, residential property prices are driven by the owner-occupier market and do not correlate to demand from residential property investors. If at the point of purchase the property is let on an assured short-hold tenancy, the value of the asset will be discounted.

More Value for Money with Residential Property Investment

Reduced affordability in the UK has also impacted the residential property investment sector as increasing numbers of pensioners purchase properties specifically to rent out to their offspring or assist in the purchase of their first home to get them on the property ladder.
Although there has been widespread criticism, it is much easier to raise mortgage finance on a property that is not going to be owner-occupied. Loan to Value (LTV) is also at a higher level for buy-to-let mortgages with lower deposits payable.
This makes the market a very cost-effective way of providing homes to younger family members while generating an income and increasing capital values for an existing pension pot.

Source: http://www.ipinglobal.com/ipin-live/407289/real-estate-still-uks-largest-investment-asset-class

5 things you MUST do to start your own business

Trying to start your own business can be exciting, but it’s also really scary. It’s a whole bunch of mixed emotions and sometimes those emotions can be so overwhelming that you never even start!

We have dreams when we’re young and as we get older, those dreams change. We start out wanting to take on the world.

Singers, actors, astronauts and doctors, soon become public servants, office workers and tradesman.

While there’s certainly nobility in ANY workplace, the question remains, when did our dreams change?

For some, the dreams is simply to start your own business, but at some point in time, you deviate from this plan.Maybe it was the risk involved, or your circumstances changed. Or maybe you’re thinking about starting a business but haven’t really pushed yourself over the edge yet?

Well starting a business isn’t hard and doesn’t have to be any more complicated than you make it out to be.

Here’s 5  simple things that might give you enough push to start your own business.

1. Follow your dreams

If there’s one thing that’s guaranteed for an entrepreneur, it’s failure. But with failure, comes strength and knowledge.

It takes failure to reach success, because of the many lessons you’ll learn along the way, but unfortunately we’re not built to accept failure easily.

It’s not easy to get back on the horse after you’ve fallen off. In fact it’s very tough! Entrepreneurial spirit is strongest now than it ever has been, but many dreams are never realised because we aren’t confident of our own abilities.

Trying to start your own business can be overwhelming but there’s always someone who can talk you through the obstacles and challenges you might face.

- Friends

- Family

- Networking events

- Mentors

The obvious key to starting a business is to simply start. And if you don’t know where to begin, then look to the resources around you. If you can’t be resourcesful, how do you expect to succeed?

2. Be savvy and minimise costs

With technology advancing faster than it ever has before a lot of savvy small business owners are starting to look at low cost solutions to starting a business. Choosing to rent everything in the office from the reception (Outsourcing to another country or to a virtual office) is a great way to save on expensive overheads when you’re starting out.

It means you can stay up to date with technology without the high upfront costs associated with it. It also allows you better control of cashflow, which is the number one reason most businesses will fail in the first 12 months.

Think about ways to minimise costs, but dont cut costs. There’s a big difference.

- Try the Phillipines for a good quality, low cost, Virtual assistant. You can expect to pay between $5 – $7 per hour for a reliable outsourced worker and if you research the market, you can find one perfectly versed in english, with graphic design and IT skills to complement the service.

- Cross capitalize with another small business start up. Split office space with a non-competing start up business. Advertise in the local paper or online. You’ll not only limit your overheads, but also share a space with someone as motivated as you are

- Create strategic partnerships. Does your business, product or service offer something valuable? Trade that service with someone offering a product or service that YOU need. Bartering is a great way to minimise spend and save money for cash flow purposes. Cash is king

- Rent out un-used space. If you have space in your office, rent it out part time. Make the most out of any opportunity to increase your capital. Work smarter, not harder.

3. Get a good work-life balance

Starting a business takes a lot of work and it won’t stop once you’re up and running. If anything, it will get harder before it gets easier.

But this isn’t a reason to quit or to never even start at all!

It’s important for you to be happy, and if you spend all your time in the office, it’s very unlikely you will be. Even if you’re just starting out.

We’re in a position now where we can capitalise on tools to access our computers and work stations for anywhere we want. Invest in good, low cost internet solution and spend one day a week working from your favourite park.

Or take a spontaneous trip. Taking a break over the weekend doesn’t mean you have to completely forget about work – Keep you smart phone close and your laptop closer.

4. Think about your strategy online AND offline

Most small business owners are guilty of letting the ball drop online. They fail to realise the potential that’s out there for online businesses.

Social media allows you to compete alot more evenly with bigger corporations and businesses because you can reach your consumers directly. Sure it might take you a lot longer to develop such a large userbase, but that’s the only advantage they have.

You might spend hours obsessing about the layout of your store, but what about your online presence?

How are you going to build an audience, convert customers and keep engaging with these customers in the digital space? A good starting point to help you think about this are the online insights tools that you can find for free on the internet.

Whether your business is online OR offline, the most valuable thing to you are customers. Before you even think about beginning, you need to think about HOW you’re going to get customers and secondly, HOW you’ll be converting them.

5. Don’t give up

Not everyone will have as much faith in your business as you will.

There’s an old saying that says “Don’t listen to what anyone has to say about how silly your business idea is. Because right now, there’s some millionaire walking around who invented the pool noodle”.

And how true is this??

While it’s always important to heed the advice of others, (your critics can actually be the most helpful) if you think it’s a brilliant idea then you can make it work. What ever the mind can believe and concieve, it can achieve.

Success is about the journey, NOT the destination, and their are plenty of other routes available for you to take. If you find one road’s closed, then simply take another.

Success is about learning and consistently improving and growing. You’ll definitely get setbacks, but prepare yourself for them.

Source: http://thesuccesssoup.com/startups/start-your-own-business

Even the Wealthy are Broke

Upper-middle income Americans aren’t saving much money says a report from the Federal Reserve. Only 45% of upper-middle-income Americans reported saving any money in 2012. This doesn’t come as such a surprise to anyone paying attention to the personal savings rate in America. The rate, while somewhat improved since 2005, is below its historical mean by 3.1 percentage points at only 5.3%.



 

Another sad statistic from the Fed report shows that 68.6% of Americans feel as though their financial well-being is about the same, worse, or much worse than in 2008. For those with cloudy memories, 2008 was the year the economy went belly-up. Again, for anyone paying attention to consumer sentiment, this isn’t so surprising. While sentiment has improved greatly from the days of deep recession, a quick look at the University of Michigan consumer sentiment survey shows readings still below historical mean. That’s not the picture of a strong recovery.

 Source: http://www.youngresearch.com/researchandanalysis/personal-finance/even-wealthy-broke

How To Flip Houses Like Steve Covey

Steven Covey is a well known self-improvement guru famous for writing “7 Habits of Highly Effective People”. He gave us seven simple principles that we can use to achieve success in life and business. Is it possible to apply his principles to house flipping?

His seven core habits are applicable to house flipping but one of these habits particularly stands out; “begin with the end in mind”. 

How The Begin With The End In Mind Habit Applies

It’s common knowledge that making a profit on house flipping is not easy but when you know exactly what it is you want to accomplish, you eventually end up having a laser-like focus that eventually concludes with you making a profit.

Numbers can break or make your house flips. Knowing how to do the math is not the hard part; the hard part is determining the correct numbers to use. In order for you to be able to accomplish this, you need to do a fair amount of research and assistance from your house flipping team.

The moment you learn how to flip houses with the end in mind, you will start making profits.

Is What You Pay For The House Important The Most Important Number In House Flipping?

While this is a very important number, what you pay for the house is not the most important number. Rehab costs are also not the most important.

The most important number is the After Repair Value (ARV) which drives all the other numbers. The After Repair Value is “the end” you should have in mind and you should use it to drive everything you do in house flipping.

Almost all the projections that you will make during the house flipping process will be based on the ARV. If the ARV is right, then every other single projection will also be right and your profit margin will be great.

Here’s How You Begin With The End In Mind In House Flipping

1. Find A Great Real Estate Agent

A great and qualified real estate agent can do a comprehensive market analysis and give you a more accurate ARV. Since we have already established that ARV is the most important number, you need to find a real estate agent that is good at their job.

A good real estate agent will look at properties in the area that have already been sold and not the ones that are for sale. This is because properties that have already been sold will help them determine how much your property can sell for.

2. Communicate Your Plans To Your Agent

Communication is important because it ensures everyone is rowing in the same direction. Finding a good agent is not good enough if you do not communicate effectively with them. They have to be 100% with you on the same page. Your house flipping team has to also be on the same page with you.

Don’t sit behind a computer and send out emails or communicate via phone alone. Get out there and talk to your house flipping team.

Other Tips On ARV

It Doesn’t Hurt To Get A Third Opinion

It doesn’t hurt to get a second or even third opinion from another agent. You can never be too careful when determining ARV.

Hire A Paid Appraiser

You might think this is another added expense but it doesn’t compare to the cost that you will incur when you gauge all your projection off a wrong ARV.

Research

Make Google your best friend and use it to double check after repair values. It’s not advisable to determine your final ARV off internet information but you can use it to double check. In addition, you can conduct a comparative market analysis.

Conclusion

Be wary of the broker who tries to inflate the ARV just to get your business. This is why it is important to get a second opinion from another expert broker. If you begin your house flipping process with the end in mind, you will be setting yourself up for success. If you use the above tips, you will have a highly successful house flipping career.

Source: http://houseflippingschool.com/flip-houses-like-steve-covey

Network marketing 101: How much time does it take to build a successful business?

When I started my network marketing business in 2009, I had hardly any “extra time” left in my schedule. I was working 40+ hours per week in a cubicle for my public relations job and I was also engaged to be married, so we were planning our wedding. The last thing I thought I had time for was a side business.

What I realized, however, was that most successful network marketers started their networking careers alongside another full-time gig. The beauty of network marketing is that it’s a very social business. You might also call it “lifestyle marketing” because a lot of the “work” takes place throughout your normal day – as you strike up a conversation in line at the bank, as you’re reconnecting with a former co-worker over lunch, while you’re speaking with another parent at your child’s soccer game.

If you can find 5-10 hours or so per week of social time in your schedule, then you absolutely have time to build a successful network marketing business. It’s not so much about the hours of time you put towards it, but how you spend that time. For example, you will have WAY more success spending 5 hours per week meeting people over lunch or reconnecting over the phone than you would spending 10 hours per week organizing your office or replying to emails.

The core of success in the network marketing industry is engaging in conversation with people and sharing about your business/product. You get paid for presenting and sharing, NOT for racking up hours on a timesheet.

If you’re new to network marketing, focus on the windows of time you have in your schedule and maximize those with revenue producing activity. And also keep in mind, this is NOT an overnight success business. Just like the athletes you see competing in the Olympics, there’s a TON of behind the scenes preparation (and often failure) that takes place!

Taking on any new skill set or career path is going to require learning. Most people don’t achieve success in network marketing because they quit too soon. Robert Kiyosaki (author of Rich Dad, Poor Dad) says to give your network marketing business a minimum of 5 years before you quit. Of course, there are exceptions to every rule. Some network marketers will skyrocket within 1-2 years and others it may take 6-8 years…the key is consistency and remembering that everyone’s journey is different.

Network marketing has positively impacted my life in so many ways. It’s allowed me to pursue a calling that I’m crazy passionate about and not be “stuck in a job”.

Success will be defined differently by each person you speak with. Some desire an extra $200 per month alongside another career they love. Others desire $3,500 per month to replace a job that no longer fulfills them. Others are seeking $20,000 per month so they can give generously and change the lives of those around them.

Whatever your definition of success is…you can find it in network marketing.

Whatever your schedule looks like…you can find the time to be successful in this industry. Decide, do and don’t quit.  

Source: http://kristadial.com/2014/07/network-marketing-101-much-time-take-build-successful-business

Are You Playing to Win...or Not to Lose?

If you have a habit of not finishing what you start, you may have attributed your lack of results to disorganization or a lack of focus. For some individuals, however, this habit is signs of an underlying psychological pattern of playing not to lose.

Stuart Emery, author of Life is Not a Dress Rehearsal and Success Built to Last, noted that where most people tackle situations with a goal of winning, others approach life with a goal of avoiding losing. Somewhere in life, they decided that they were incapable of winning and have lowered their expectations to merely not coming in last.

The groundwork for this pattern is often laid in childhood. For example, if a father raves over his young daughter’s drawing, she may have next colored on the wall, not recognizing that the wall is not an appropriate place to express artwork. After repeated incidents of getting in trouble in such a way, she may have drawn the conclusion that she couldn’t win. She didn’t like the pain of not winning, so she unconsciously adopted the strategy of trying not to lose in the future.

Not finishing what you start is one of many habits you fall back on when playing to not lose. The reason this has worked for you in the past is that if something is incomplete, it cannot be judged as not good enough. You can just say that it’s not “finished.”

Other ways we ‘play not to lose” include:

•     Playing the Judge.  By being the judge, you never have to be the participant. By pointing out how imperfectly others are dancing, for instance, you get to avoid dancing yourself, which could open the door to you failing at the task.
•     Being perfect. With this approach, you attempt to not lose by doing everything as perfectly as you can… or at least by presenting a front that you are “perfect.” You never really relax or let your guard down. Instead, you overdo everything instead.
•     Becoming a “problem.” If you take on the role of the identified problem, others will need to stop and take care of you. This is a form of sabotage. Because others are directing their time and energy into helping you and are less likely to win themselves.

If you recognize that you’ve been playing not to lose, it’s time to shift the behavior.

Embrace Feedback

Your decision to stop playing to win was most likely unconscious. You received feedback that you interpreted as being a condemnation of your abilities and who you are.

An important step in shifting this pattern will be recognizing feedback for what it is: Information that tells you whether you are on course or off course.

When you get negative feedback – such as lack of results, little or no money, criticism, poor evaluation, inner conflict, and unhappiness – it’s a sign that you are moving away from your intended goal.  Evaluate what you’re doing and make a course correction.

When you receive positive feedback, such as praise, happiness, money and results, you’ll know that you are back on course.

Sharpen Your Focus

Another thing you can do, particularly if you’ve developed a habit of not completing what you start, is to train yourself to sharpen your focus.

In the Achievers Focusing System, Les Hewitt, author of The Power of Focus, teaches his clients to focus their attention only on what they want to accomplish in the next three months. They select one goal in each area of their lives during that period.

Then, each week, they identify the three most important things that must be accomplished during that 7-day period to move them closer to their goals. A weekly check-in with your accountability partner helps to keep you accountable for achieving these tasks.

To download a free copy of the Achievers Focusing System 3-month planner, click here. (For your convenience, we’ve also posted a filled-in version of the form so that you can see what type of information should be entered in each field.)

Chunk It Down

The final word of advice: As you begin to build a new habit of completing what you start, you may feel overwhelmed and lost about what to do next when you look at your list of goals. The best approach is to chunk down your goals into small, manageable steps.

Interview people who have already accomplished what you want to do and ask them to share all of the steps they took. If you can find a book or manual that guides you through the process, even better. Another approach is to imagine that it’s the future and you’ve already accomplished your goal. Start at the end and look backward. Notice what you had to do to get to where you are.

Capture all of these steps in a list or mind map. Then convert all of your to-do items into daily action items that can be plugged into your calendar. Start with the first item on your list, and when it’s finished, cross it off and tackle the next item. Before you know it, you’ll be completing projects and well on your way to playing to win.

Playing not to lose may protect you from the potential pain of negative feedback. But the cost is steep. Every time you fail to live up to the commitments you make to yourself and others, you undermine your self-confidence. Use the steps outlined in this article to identify why you’ve settled for simply not losing and to take the corrective action you need to complete what you start.

Source: http://womenentrepreneursecrets.blogspot.co.uk/2014/08/are-you-playing-to-winor-not-to-lose.html

What I Learned Raising Over $30 Million in Private Capital: Types of Money

A week ago, I had the opportunity to present about Raising Capital at the AAPL – American Association of Private Lenders event in Philadelphia, and although some of you missed it, why not cover some of the highlights?

Sure, it’s not the same as being there, especially since I had my securities attorney and another large private capital fundraiser answer questions on a panel at the end.

But, we covered some key components, such as: Types of Money, Money Myths, Mistakes Raising Capital, Tips on the Best Ways to Raise Money, Investor Relations, and the new Jobs Act, especially 506(c) and its implications.

Today, I’m going to cover Types of Money and why they’re so important.

If you can demonstrate to people where they can free up money or save money on this like taxes, it could be a huge help to them. Also, if you have an investment vehicle to put capital in, then you’ll probably raise more money too.

The reason that this is so important is that if you can demonstrate to people where they can free up money, or save money on things like taxes, and if you have a vehicle to put it in, then you’ll probably raise more money.

The concept of the four types of money really comes from Robert Kiyosaki: There’s Your Money, the Banks Money (OPM or Private Money), there’s the Tax Man’s Money, and there’s the House’s Money.

He also goes on to teach that there are three different asset classes that one can invest in: Businesses, Real Estate, and Paper Assets, with pros and cons to each class.

Businesses

Pro: This is the asset class that offers the highest of all returns on investments.

We once had a guy, who wanted to buy PPR, and his whole model was to purchase start-ups, add value, and in 3 years flip the business for a profit. We only have to look at Instagram or Microsoft to see how profitable investing in a business can be. If you really think about it, many tax laws were written to favor business owners.

Con: Businesses are the toughest asset class to own, develop, and maintain.

Real Estate

Pro: Real estate is the easiest of asset classes to leverage. It’s easier to borrow money for real estate than it is for a business or paper assets.

Con: For the smaller investor, real estate can be far more capital intensive than investing in paper assets. For example, I can invest $25 in Lending Club, a paper asset in the form of an unsecured note, but it’s hard to invest $25 dollars in a piece of real estate.

Paper Assets

Pro: Paper assets are the easiest of all asset classes to get in and out of. An example for me is that I can sell a note in less than 30 minutes. I’m not so sure that I could sell a piece of real estate that quickly. I could also trade a stock option in seconds or minutes.

Con: You probably have the least financial control. There are definitely fewer tax advantages, and they can also be highly volatile.

As Doug Andrew, author of “Missed fortune 101,” says, “These markets are like a person with a yo-yo going up stairs. Over the long term they go up (stairs), but there are ups and downs along the way (yo-yo).” And, Andrews advises his readers to protect themselves from the ups and downs of the markets.

Many people say that they’re diversified in one mutual fund or maybe in several mutual funds, but to me, if you’re only investing in one asset class, then you really aren’t diversifying.

I find to be truly diversified; you need to be investing in more than one asset class. An example of this would be Donald Trump, who invests in Real Estate and Business, or Warren Buffet, who diversifies between Paper Assets and his Business.

I like to think that I’ve been able to create synergy by investing in a business like PPR with OPM (Other People’s Money) from a Private Offering, while also using the Bank’s Money or Private Lenders to do my Real Estate deals.

I also like to think that I’m using as many Tax Strategies as possible to free up more of my money, by maintaining my RE license to take advantage of more passive losses through depreciation (not capped at $25K), and by setting up an ESOT (Employee Stock Ownership Trust) at PPR to save tax on our business revenue.

I do this, while also using my own money to personally invest in re-performing notes, which actually create synergy amongst all three asset classes.

It’s really hard to beat buying a note at a discount, with a high yield, that’s backed by real estate, with a homeowner occupant, who has a vested interest in paying their loan because they need a place to live.

And last, I like to think I’m able to take some of the House’s Money off the table by putting some money in a more protected, tax sheltered vehicles like IRA accounts and Insurance Contracts.

Many people tend to put all their money back into their business or their real estate investments, etc. But, I’m a firm believer that houses were meant to store people and not cash.

There are always market downturns, lawsuits, and bankruptcies out there, but there are also safer buckets that can be utilized to take some of the House’s Money off the table.

Source: http://www.biggerpockets.com/renewsblog/2014/08/14/learned-raising-30-million-private-capital-part-types-money

3 money lessons your child should learn before college

College is an exciting time. New classes, a new atmosphere, and seemingly limitless possibilities. But with that new-ness, there can also be a lot of fear. In addition to worrying about their ability to handle the course load and thrive without their parents and friends, many students wonder if they will be okay financially.

College costs a lot of money. So before you send your child off to school, make sure they are prepared to make good financial decisions that will allow them to have a bright financial future. Here are three money lessons your child needs to learn the summer before college.

Savings is more than “rainy day”

Most people would agree it is a good idea to save money, but not everyone agrees why. Before your child heads off to college, it’s important to talk about what a savings fund really does for you.

Some people believe you only need to save for a “rainy day,” and therefore only need a limited amount of money in your savings account.

Others believe a person’s savings account should go above and beyond the basics, to provide security and to enable you to take on exciting, once-in-a-lifetime opportunities.

That’s just the conversation you need to have with your soon-to-be college student.

Ask your child to think of their current financial situations, with and without savings. What if they were offered a job or vacation opportunity right now in a desirable foreign country? Would they have the funds to make it happen? Would they be able to say “yes,” or would their lack of savings tie them to their current job or location?

The sooner your child begins to see his savings account as more than a “rainy day fund,” the sooner he will take saving money seriously.

Learning the value of an hour

Hourly jobs are staples of the college experience, so encourage your child to get a jump on it with an hourly summer job before he departs for college. This is a great way to meet new people while taking an active role in his or her finances. It’s also a great way for a college student to learn the value of an hour.

Everyone has the same amount of time in a day, even though some people make a lot more money than others. Use this example to teach your child about diversifying their income with passive income.  Also help them understand how developing a diversified set of skills / interests is important to wage growth and long-term employment prospects.

Passive income is recurring income you earn for work that you have already done. For instance, authors earning money from books they have written is passive income. Earning royalties for a product or idea you create is also a way to earn passive income.  Investing, though, is probably the most common form of passive income.

Over time, earnings from passive income can greatly outrun earnings from hourly jobs, allowing people to enjoy a higher quality of life and a better financial situation in retirement. So teach your child this lesson, and encourage them to prioritize working on ways they can reap the rewards of passive income.

It is also important for people to have a diverse set of skills / interests, because you never know if what is lucrative one year will be lucrative the next. For instance, knowing a great deal about how to make a typewriter work was a good idea in the 1970s, because it made life easier if you worked with a typewriter. But nowadays, not so much.

Help your child experience the difference between hourly work, diversifying their skills, and passive income to motivate them to build wealth early on.

Budgeting and buying low-cost

When children first head to college, it is common for them to discover large box stores that try to sell college necessities to them. From couches and mini-refrigerators to cutlery and coffee machines, students can end up with a large total just purchasing the bare necessities.

But your child does not have to pay the big tab when it comes time to prepare for college life.

Teach your child that new is not always worth the price tag, when a used item would do the same thing. Consider checking out yard sales, Craigslist, and thrift shops to compare prices for new versus used items.

While doing this, a fun game you can play is to teach your child the difference between purchasing new and used items in terms of how much money they save. Have your child shop and compare the prices of new and used items. Challenge them to find the items they want at the cheapest costs possible.

Then, have your child subtract the difference between the average cost of a new item and the lowest price they could find. After your child makes their purchases, reward your child with the difference in price, and tell them to use the money as a beginning to their savings.

Getting off to a good start with 3 basic money lessons

College is an exciting, scary, expensive time. So make your child’s college experience a worthwhile investment before they ever set foot on campus. Teach your child these three money lessons before you drop them off, so you will know you have set them on a path toward financial responsibility and success.

Source: http://blog.wealthminder.com/goals/education/3-money-lessons-child-learn-college

3 Reasons To Love Investing In Real Estate.

There are many reasons to invest in real estate. I’ve been investing in cash flow properties for about 10 years now and wanted to share my personal 3 Reasons Why I Love Investing in Real Estate:

1. Invest Locally

Every time you buy a single family home, duplex or apartment complex -  you are investing in your local area. You are improving your local city and neighborhoods one house at a time and providing housing solutions for the people in your local market.

2. Cash Flow

Cash flow is my personal favorite reason for investing in rental homes and apartments. Investing in hard assets that produce income is a huge benefit of buying and holding investment property. Your tenants pay your mortgages and your cash left over after all your expenses is your net cash flow.

Imagine making $300 per month in net cash flow and not having to work much to produce it.  If you invest in 15 houses, you could create $4,500 of monthly cash flow while enjoying all the other benefits of single-family homes.

3. Multiple Exit Strategies

A number of exit strategies can produce great results.  You can be a landlord and enjoy rental income; you can use lease options as your exit strategy; you can sell with seller financing and enjoy income from your note, or you can sell the house outright to a new buyer (flip it).

I can personally say that it’s been very rewarding and profitable investing in various types of rental real estate deals. I think the flexibility that it affords me to be home with my kids is the best reason of them all- for me!

How about you? What are your top reasons for investing in real estate?

Source: http://www.reiclub.com/realestateblog/3-reasons-to-love-investing-in-real-estate

4 Ways Income Investors May Get it Wrong

For decades, there has been a grand debate afoot in the investing world between “total return” and “income” investors. The truly educated don't worry about it much because they realize there isn't a lot to it. Your goal should be to avoid an extremist or absolutist position on the matter.

Income investing

The basic idea behind income investing is that you only spend the income from your investments. Seems like a great idea, right? It's easy to know when you have enough to retire—when the income from your investments replaces the income from your job (or at least your living expenses). Plus, you know you'll never run out of money if you're only spending the income.

Unfortunately, if you become an extremist in this camp, you may get burned by several issues. There are really 4 ways that income investors get it wrong when compared to a "total return" investor.

1. Income investors are likely to underspend

Safe withdrawal rate studies, such as the Trinity Study, have demonstrated it is quite safe (although not perfectly safe) for you to spend about 4% of a traditional portfolio each year and expect your portfolio to keep up with inflation throughout a 30-year retirement.

However, these days most traditional investments have a yield much less than 4%. The Vanguard Total Stock Market Fund yields just 1.8% and the Total Bond Market Fund is only slightly higher at 2.1%. CDs, "high-yield" savings accounts, short-term bond funds and most muni and Treasury bond funds are even worse. Even value stocks and REITs have yields much less than that.

If you're only going to be spending the yield on these investments, you're going to be spending much less than 4% per year. That means you will need to do one of 3 things: have a higher savings rate, work longer, or spend less in retirement. Since you are spending less, you are also likely to leave a lot more money behind at death.

In short, you'll spend less than you could have if you were willing to spend some principal.

2. Income investors may not hold the best portfolio

An income investor is far more likely than a total return investor to chase yield, since every little bit of extra yield increases his or her lifestyle. However, there are many investments with a high yield whose total return may not be what you would hope. The classic example is junk bonds, and the junkiest of junk bonds these days are peer-to-peer loans.

A portfolio of peer-to-peer loans may yield 20%, while only having a total return of 10% due to a high rate of default. If you're spending 20%, that portfolio isn't going to last long. That doesn't mean there isn't room for higher yielding investments in your portfolio, but you want to make sure you are holding a diversified portfolio with excellent long-term, risk-adjusted returns. Such a portfolio almost surely will include some assets that have a low-yield.

Never forget that a yield of 8% is not the same as a total return of 8%. While it feels good to have an 8% dividend in hand, if the investment actually lost 25% in value, you’re not making much progress financially.

Investment real estate is a particularly attractive asset class for income investors because a significant portion of the return comes from income, often 5% to 7% of a 7% to 10% return. This yield is much higher than anything available in the "paper market" outside of low-quality bonds.

While income property can form a significant portion of your portfolio, a portfolio of 100% real estate doesn't pass the sniff test when it comes to diversification. In addition, real estate possesses significant downsides as an asset class including significant maintenance and transaction costs, aspects of a second job, and an inefficient market requiring expertise and experience to get solid returns.

3. Income investors may pay too much in taxes

As a general rule, income tends not to be very tax efficient. There are exceptions, of course, as muni bonds are usually federal, and sometimes state, income tax free and some of the income from real estate can be shielded by depreciation, especially early on in the life of a property.

Bond dividends, REIT dividends, and CD interest is taxed at your regular marginal tax rates instead of the lower dividend and capital gains rates available with stocks. To make matters worse, you have to pay those taxes even if you didn't really want to spend that income yet. There is no way to defer the income until you actually want it in the future.

However, a total return investor can often "declare his own dividend" by selling some of his investment—for instance, a few shares of stock. The tax bill on that money (which spends just as well as CD interest) may be very low when you consider the ability to sell high-basis shares, harvest tax losses, and take advantage of the lower long-term capital gains rates, especially in the lower brackets.

4. Income investors may get burned by inflation

 
Higher yielding investments, such as CDs and bonds, tend not to keep up with inflation nearly as well as traditional lower yielding investments such as stocks.

If you focus too much just on income, you may forget that your real opponent in the investing game is your personal rate of inflation. If your income is steady, or only increasing slowly, and your expenses are increasing at a moderate rate, it won't take long before you will be faced with an unsavory choice: cut your lifestyle or sell your investments.

A total return investor spending 4% of his portfolio each year has an inflation adjustment built in to his plan. An income investor needs not only to make sure his investment income is greater than his spending, but also needs to make sure it will stay that way as the years go by.

The solution

 
Rather than focusing only on your investment yield, first build a reasonable, diversified, low-cost portfolio without considering the yield. Then, when it comes time to spend from that portfolio, use a combination of income and tax-efficient selling of assets to fund your retirement-spending needs.

Avoid an extreme position on income in order to develop a successful investing plan.

 

Source: http://www.hcplive.com/physicians-money-digest/personal-finance/Dahle-4-Ways-Income-Investors-May-Get-it-Wrong

The Power of Your Network in Real Estate

I was chatting with Chris Winterhalter, a successful apartment building investor and active participant in the Bigger Pockets forums.

He talked about some of the advances he made in his investing career, and many of them were tied to people he met. In fact, he met his current business partner at a real estate investing conference. That partner owned a commercial construction company and wanted to expand into apartment buildings. Chris was a wholesaler/flipper and wanted to get into apartments. A perfect match.

This conversation made me reflect on what networking has accomplished in my career but also made me think about what I could be better.

We Can Accomplish More with Others, Then We Can Accomplish on Our Own!

I had an apartment building under contract, due diligence was completed, the appraisal was completed and we were 14 days away from closing.

Everything looked good. Until I got a call from the loan underwriter who informed me that the local bank I was working with changed their mind about the deal. “The loan committee didn’t like the area the building was in”, was all he said.

Wow, really ?!? Two weeks before closing?

Fortunately I had been working with 4 other lenders, got them to present me with term sheets, and picked the best one. The second best one looked pretty good at this point! Sure enough, that bank jumped on it, we transferred the appraisal and they closed on it in 23 days.

I would have been stuck had I not been networking with other brokers.

The Power of Your Network

While I get the majority of deal flow from commercial real estate brokers, occasionally I get one from someone in my network.

One time I got a smaller building through a wholesaler from whom I had previously bought houses to flip. He knew another wholesaler who had this build under contract and was looking to sell the contract. The deal didn’t work out, but it looked promising for a while.

I do better when I have mentors. They give me confidence I didn’t have before. They might say “buying a 100 unit isn’t so bad. So you need to raise $1M, so what? It’s not that hard, I know you can do it!” Even if they don’t directly help, they’re confidence in me lets me expand my own comfort zone so that I, too, start believing I can do it.

I can Improve with My Networking

My friend Jonathan is my model in what it means to be a good networker: he’s constantly introducing people to each other.

He spends time with people, he calls them regularly. He asks you what you’re looking for and then keeps his eyes for something that could help you. He doesn’t ask “what’s in it for me?” but “what can I do to help you?”

I’m outgoing enough, but I’m not intentional enough with networking. I need to be more like Jonathan and find ways I can help others in my sphere of influence each and every day.

The lesson here is that we need to be more intentional with our networking. Put it on your list each week. Make that phone call, schedule that lunch, follow up with conversations, attend that investment meeting. Then figure out how you can help people achieve what they’re striving for.

What do you do to network with others? What can you do better?

Be sure to leave your comments below!

Source:  http://www.biggerpockets.com/renewsblog/2014/08/11/power-network-real-estate

10 Things to Look Out for When Buying an Older Home

Older homes possess an allure that cannot be found in a new home. The mesmerizing architecture of an older home and its distinctive character may appeal to you at first sight, but do not forget that not only are older homes reminiscent of the years gone by, but they also bear the brunt of time. Older homes need careful inspection and maintenance – a task which may not suit all buyers.

The first step to successfully buying an older home is to weigh your options and decide what features could potentially turn out to be deal-breakers. What do you look for in a house? What purpose would your house serve and what kind of furnishings do you intend to use? Answering questions like these will help clear up any confusion and give you strong points for or against buying any home.  Deal-breakers could vary from excess expenditure in repairs to the location of the house. Bear in mind that the level of commitment required to own an older home can be greater than owning a newer home and being a “renaissance man” may come in handy.

1. Careful inspection of the disclosure

Buying a home involves a lot of communication between the buyer and the realtor or seller. If you have a realtor to represent your interests, it does not mean that you have no part in the dealings or communication. A realtor would help narrow down prospects that best suit your requirement. However, careful research on your part is a must and could save you a lot of money and time.

To start off, you should be a well-informed buyer so be sure to ask lots of questions regarding the condition and history of the property. Understanding and inspecting previous repairs and replacements could help you come to a decision on whether the major concerns are manageable or feasible. Disclosure statements from sellers are an obligation and should be carefully inspected to make sure that you are completely aware of the issues and problems which could affect your purchase.

2. Cost of homeowners insurance

Insurance is essential to safeguard your home against damages that result from accidents. Additional policies could be added to insure the house against damages resulting from natural calamities. There are several forms of insurance which covers various levels of protection to suit the interests of the owner. Insurance agencies may be skeptical when it comes to insuring an old house and you may end up paying more than you expect. Have a candid conversation with your insurance agent about the home so you can be certain of the cost of insurance before buying the house and avoid any surprises down the road.

3. Foundation

Older homes are more likely to have problems when it comes to the foundation. A clear inspection of the basement will reveal possible cracks and shifts in the frame. Cracks are a bad sign and may indicate permanent, serious damage to the structural integrity of the home. Old houses are known for their strong foundation, but with time they may have suffered serious wear and tear. A thorough inspection should reveal serious troubles with the foundation – a definite deal-breaker.

4. Electrical wiring

Older homes may need updated wiring, especially considering the high demands of our electronics hungry society, and rewiring an entire house may turn out to be painfully expensive no matter how much you love the beautiful wood work and ornamental designs. The cost and effort of rewiring the house should be considered before you finalize the deal. If a house has three-pronged plugs, it hints at a modern grounding. Presence of other modern safety upgrades such as reset buttons on outlets could also mean upgraded wiring. However there are many problems that may go unseen and hence, do not forget to have a professional inspection done.

5. Plumbing

If the house has original plumbing, then depending on how old it is, there is a good chance that it’s outdated and will require work down the road. In case of previous repairs or replacement, the installations should be inspected. Leaks and clogging are a common problem with old houses. Just because the plumbing has been upgraded, it does not guarantee that it is functional or won’t pose future problems.

6. Heating and cooling systems

If you are accustomed to central air and an even temperature throughout your home, you may be in for a surprise. Replacing the HVAC in an older home can not only be expensive but it may also not deliver the immediate changes to heating and cooling that you are familiar with in newer homes. Older fixtures may also cost you a lot in terms of utility bills. Older homes can come with radiators which require fuel oil and may not be practical in the long run. It’s also a good idea to see a years’ worth of utility bills

Older homes may very well have a properly working furnace but make sure the person you choose to inspect your home before the sale has experience with older homes and heating and cooling systems.

7. Roof

If the roof has been previously worked upon, then it is a must to check for signs of leakage and make sure that any changes to the roof line have the proper structure under the roof. Moldy wood, drips and water stains are a clear indication of trouble. If the original roof is still in place, then there is a good chance that some work will be required before long – which translates to more time and expenses.

8. Windows.

Old homes come with old windows which may offer poor insulation. If a previous reconstruction has widened window frames, then the quality of the work must be assessed. Improper extensions and tampering might cause problems such as rigid windows and collapsing of the frame under severe circumstances. Also look for any leaks around the windows, both original and/or replacement windows.

Keep in mind that replacing all the windows in a 3,000 square foot home will cost in the 10s of thousands of dollars.

9. Extensive repair work

If the house requires extensive repair work, it is going to drain a lot of your money and time. The return on investment may or may not be worth the money (remember the movie “The Money Pit” ;). Is it really practical to take on such a huge responsibility? If you’re handy with tools and love working on projects, this may be a great opportunity for you but if you’re more like me, not the handiest guy in the world, this home that you love my be the end of you or at least your marriage J. You may feel an emotional connection to the house, but is it going to be worth the effort?

10. Compatibility between the house and your existing fixtures and appliances

Household items were different back in the day and definitely less demanding of the house. To ensure that you do not have to invest in a brand new set of furniture and appliances, make sure that your existing sets are compatible with the house in terms of size, proposed utility of appliances etc.

In spite of the hurdles and anomalies, older homes are often worth the effort. They are unique and elegant with a personality of their own that will add a lot to your pride of ownership!

Source: http://mlsmaps.com/mls-listings-info/index.php/10-things-to-look-out-for-when-buying-an-older-home