Investment Property Calculator

After sitting on the sidelines for a few years, I’ve decided that this is the year I’m going to start personally investing in real estate. I’ll be sharing my thoughts and learnings as I go through the process.

This past week, I think I may have found a good condo property. There are a few issues though. It’s a small building and 40% of the units are currently rented. If I buy, the rental-to-owner ratio would go over 50%, potentially causing issues in getting a mortgage. However, I ran the financial analysis and the numbers are the best I’ve seen yet. Positive cash flow and slightly negative net income. The building is OLD, so I’ll need to insure that there aren’t going to be any special assessments soon, and that the HOA fees won’t rise considerably.

While I’ve built my own investment model through Excel (yes, I am a financial geek), here is a good online financial analysis tool that you may find useful…Investment Property Calculator.

Stay tuned for more exciting adventures as I continue on my path to becoming a landlord.

Teaming with Our Sister States?

I’ve written about the lack of affordable of housing in CT before. Add to this a few of my other pet peeves, suburban sprawl (yes, I know it is counter-intuitive for a REALTOR to dislike sprawl) and youth drain, and we’ve got the potential for long term economic hardship not only in CT, but all of New England.

Clearly, on a town by town basis, we can start business development and real estate development projects that encourage working here rather than migrating to the more affordable Southern states and reusing land for better economic use. Blue Back Square in West Hartford center is a good example of redeveloping existing land for increased economic benefit, rather than contributing to sprawl. CT’s Department of Economic and Community Development promotes an aggressive agenda of economic and community development initiatives throughout the state.

But what about our sister New England states? Are they facing the same issues? What can we do to work together to fight “youth brain drain” and the growing housing affordability crisis? Well, as New England Futures sees it, all of New England needs to band together and work on these issues as a region, rather than individual communities and states. No more of the “I, I, I” attitude and more of the “Us, Us, Us” attitude.

This initiative seems like a good idea, however is it too many cooks in the kitchen? And if you take the bureaucracy of one state and add five more states to it, does it just become an unmanageable, ineffective distraction that dilutes our individual efforts?

Closing Issues

Here are a couple of quick tips in order to avoid potential issues at closing.

If you know you’ve found the home you’d like to purchase, before you leave the property, make sure you go over the Inclusion and Exclusion sheet. If there are items that you would like included that aren’t spelled out on the I/E sheet, make sure they are written into your purchase and sale agreement. No one likes to go through the final walkthrough and expect to see the fireplace andirons there, only to realize they were removed by the seller because they weren’t included in the sale.

Also, when you go to your final walk through, make sure your agent brings a digital camera. If there are items still left in the house, or if the house is not in broom clean condition, or some other type of issue exists, a photo will speak a thousand words at the closing table. The issue will be easier resolved if everyone can see the exact problem.

Subprime Bailouts

Congress is starting to rumble about devising a program to bailout subprime borrowers. Now that adjustable rates have started to rise, potentially 1.1 million homeowners could be forced into foreclosure in the next 6 months. The government isn’t suggesting it will pay off loans, but that a program focused on counseling and loan restructuring could help the problem.

No offense, but I don’t want my tax dollars to pay for this program. Why isn’t accountability being pushed back on the agents, lenders, and underwriters that started this fiasco? Granted, many of these companies are defunct now, but shouldn’t individuals still be held accountable?

As a real estate professional, it is my duty to help clients find housing they can afford and explain how their decisions now will affect their home value in the short term and long term. “Choose to pay a little less now and live on a busy street? When it’s time to sell, your days on market will be longer and most likely you will not enjoy as much price appreciation as similiar homes on a quieter street.”

Lenders should do the same. “An adjustable rate mortgage will do just that, adjust. While the rate today may result in a payment of $X, if rates were to rise, you may expect your payment to increase to $Y. Is that something you will be able to afford and feel comfortable with?” Just because a client doesn’t ask the question, it doesn’t mean that you shouldn’t explain a potential situation to them. It is actually more imperative that you do explain possible “worst case scenarios” to them because they are probably unaware that the scenario exists and what it would mean to them.

Really, nothing makes my blood boil more than when industry professionals don’t look out for their clients’ best interests. If your lender or agent takes a short term view of “I just need to close this transaction,” consider using someone else or at least getting a second opinion. A significant portion of your financial future is riding on the advice they give you. Make sure their short term goals won’t result in a long term financial problem for you.