Posts Tagged ‘Real Estate’
With all of the uncertainty right now with the US Dollar, the economy in general and combined with people’s increased sensitivity to the need to look after their own finances. What do you do?
This week I have brought “The Mortgage Minute” to you, by Peter Kinch to talk about where rates might be headed .. but more importantly – what should you do?
Pay off your Mortgage? Leverage the equity in your home home to buy more property? or perhaps you would rather do nothing, but hope that all turns out ok for your future?
Listen to his perspective & then make a decision that is right for you. Let me know your thoughts on this topic!
As Real Estate Investors, Jeff and I are often asked to help people make decisions. Most people truly do not understand all of the benefits of renting versus owning; nor do they understand the Profit Centres of Real Estate as an investment.
Some people want to own their own home, but do not think of it as a potential investment – only as a place to live. Many people who could afford to purchase & own their own place do not. I wonder why? Perhaps they only see all the work of maintaining a home, or worry about having to replace a furnace or fix the plumbing. Or perhaps they see the monthly rent they pay as less than the cost of ownership, and like being worry free.
What these people don’t see are all of the benefits of owning real estate, either as a personal residence with the long term goal of using it as an investment vehicle (leverage) or see themselves as Real Estate Investors.
It is my hope that after reading and understanding the 6 Profit Centres of Real Estate – they may open their mind to the potential of owning a home & growing their investment dollars for the future.
Understanding these profit centres will help improve both financial IQ and financial future!
Profit Centre #1 = CASH FLOW
As it relates to a property that is purchased as an investment ..Cash flow is simply the cash left over after you collect all the rent and pay out all of the related expenses including mortgage, taxes, insurance and a “contingency fee” for future repairs. Personally, Jeff and I NEVER buy a property that does not produce positive cashflow. Our viewing is that if we are going to subsidize someone’s rent, it will be for family, not tenants. In addition, we also have an exit strategy (or two) including timelines, Read the rest of this entry »
Always make money in a win-win situation. Everyone involved in the transaction should be satisfied and feel like a winner.
If you make money at someone else’s expense, it will come back to you in a negative way. Remember, what goes around, comes around”
This quote reminded me of a situation that recently came up between 2 couples that we have been mentoring, of which one of them is a JV Partner in a property with us, and the other couple a potential JV Partner.
Our current JV partners decided they would like to sell one of the properties that we co-own with a 50% share. We agreed with them that the timing was appropriate and that a substantial capital gain could be had by all parties. We had held the property for approx 2 years. They have only $ 8000 capital invested and we have each been recieving excellent cash flow payments for approx 18 months.
The existing mortgage on title is held in their name, and as a result, they have final say & signatures on the sales deal. Together, with the help of a Real Estate agent, we decided on a selling price.
An offer came in, it was accepted by our partners (with our blessings) and the paperwork began… with the anticipation of a quick closing. Also of interest is that both the purchasers and the sellers are business acquaintances of each other and both are mentored by us.
As in all things in life, hiccups and challenges will arise when one least expects them. In this case, the hiccup came in regards to the quick close anticipated. Due to some inexperience in the sellers end, handwritten notes were made on the purchase offer, and the offer needed to be altered, prepared again and then signed. All creating some time delays. To add to the time challenge, the legal team (acting for both sides) had summer holidays interfere with the timeliness of the documentation being prepared. All normal. Perhaps a little annoying, but certainly not unacceptable or unusual.
As in most real estate deals, an appraisal was required in ordered to prepare for bank financing. The appraisal was paid for by the purchasers, and the appraiser was chosen by the bank. The appraisal came in at approximately $ 35,000 higher than the agreed upon selling price. The seller asked the purchaser at what value the apprasial came in. The buyer (who was reluctant to share the information), felt she had no choice but to reveal the appraised price with total honesty ~ and told the seller of the appraised value
Here is where the ethical question comes in.
The time lapse created an opportunity for the seller to legally back out of the sales agreement….. What would you do?
In a future blog I will release the ending to this real life dilemma… Stay tuned! In the mean time, I would love you to share your thoughts on this situation. What would you do? What do you think should happen? I look forward to your comments!