Column: Do your homework before buying a dream house

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Over the last few months, I have spoken to a number of sellers, investors and purchasers and for the most part many are lacking certain key elements in the process. I am not sure why this would be since for the great majority, this is the most valuable asset one possesses and you would figure greater knowledge would be a way to protect that asset.

But it never ceases to amaze me how people approach their specific situation. Here are some important facets to consider when selling:

1.) Reducing clutter created by those items that you will not be taking with you when you move. Make a list of what you will be taking with you and either give away, tag more expensive items or mark those headed to a garage sale for bric-a-brac (for a tax deduction, always ask for receipts, but ask your accountant or CPA for advice)
2.) Thoroughly clean your home and consider looking at your place through the eyes of a purchaser as to what they might think and feel is wrong with your home. Fix, paint or upgrade within a budget where you will either get your investment back or make your home sell faster in our now current balanced market. (It’s no longer a seller’s or buyer’s market).
3.) Is your interior and exterior presentable and are you aware of what you really need to do?
4.) Are you using verifiable comparable sales as well as which homes are currently on the market, under contract, expired and withdrawn? Is it a release from your local MLS or are you relying on using Zillow’s Zestimates, which is many times, highly inaccurate due to their algorithms, to determine your price and not a realtor, who has accurate real world information based on real current sales?
5.) Does your home need staging to provide a real “lived-in look” especially if you have already moved or maybe a spruced-up appearance to attract that one serious and ready purchaser?
If you are an investor for the long haul, or a fixer and flipper, here are some items to consider before jumping in and losing your shirt.
1.) What is the budget that you have to invest and what types of properties are you looking to invest in:
a.) Single or multiple-family houses (1-6 family)
b.) Strip centers
c.) Mixed use buildings (stores plus apartments)
d.) Warehouses
e.) Buildings with 7-100+ units), etc.
2.) What type of R.O.I. (return on investment in percentage, eg. 4-6%) or Cap rate = Net operating income / Current market value (Sales price) of the asset. (paying outright for the property is cash on cash return) are you looking for? A 4 cap, 5 cap 6 cap, etc.  As an example, if you pay $500,000, and you want your cap @ 4%, then you would need a $20,000 net for the first year.
If you are buying a fixer upper to put the property right back on the market to sell and earn your profit, one must be very, very careful in your estimation of value. Construction costs equal to labor plus materials are called hard costs, while architectural, engineering, legal, loans, movable equipment, furniture, computers, permits, taxes, and insurance are called soft costs.

One must be extremely proficient or attach yourself to an expert at estimating the costs to repair and upgrade the house, so a profit will be attainable  upon the sale. I will be discussing fixing and flipping in more detail at a future date to keep new investors safer because the market is changing and one can get caught, as they say, holding the bag and losing money on their first fix-and-flip investment.

I do not recommend going it alone on the first few projects. One must share the risk among one or two other smart and knowledgeable people. One can make excellent money fixing and flipping, but be sure of what you are doing and approach it very carefully. Surround yourself with expert and competent individuals, who know what they are doing and have seasoned experience. Lastly, line up all your financing in advance, whether it be through normal conventional channels or hard money lenders, who will charge much higher interest rates compared with conventional lenders.

First-time purchasers of primary residences, whether it be a home, home owner association, condo or co-op, also need to have some basic knowledge of what their primary and crucial objectives are, when searching for a home for their family or themselves. What is the No. 1 priority in their search:

1.) Schools?
2.) Neighborhood and demographics?
3.) Transportation and commute time to work?
4.) Distance from parks, shopping restaurants,

I would suggest a very crucial item to be secured before going out and searching for your first or dream home is to talk to a mortgage person (or ours) to get a pre-qualification letter from the lender, who will absolutely lend you the required money, based on your income, credit and debt/income ratios and the appraisal of the property. Also, interview your real estate agents and look for reviews and testimonials online to read what current and former clients say about the services and reliability of the agents they used and their recommendations to give you the necessary insight and choices about whom to entrust with searching and finding your most valuable asset that you will be purchasing.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular free updates of sold homes in your area and a free Comparative Market Analysis” of what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at:Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.

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