Just want to make a correction to last week’s article about the sale prices on co-ops and condos.
From 2017-2018 sales prices on one bedroom and 1 bath co-ops have ranged from $136,500-$437,000 from the North Shore of Nassau through Forest Hills, Queens. One Bedroom and 1-1.5 bath condos have sold in the range of $380,000-$660,000.
These are substantial increases since the bottom of the market in 2011.
This has been the longest run that I can remember in the last 35 years and longer. But then again look at the stock market and the recent small correction ( a 5 percent decline) in the stock market; could be an excellent buying opportunity. However, corrections are good, for the next push to a higher level.
However, the real estate market hasn’t had a correction, due to the severe lack of inventory and therefore is nowhere near finished or slowing down until rates reach approximately 6.5-7 percent, which in the past had been the “normal rates” from 1955-1975.
Some of you have called and emailed me about considering the purchase of a second residence to rent out for income and then they would keep the Christmas or Presidents week open for themselves.
Florida is very hot at the moment for rentals, (I know you are maybe thinking about the past hurricanes, but they will come and they will go, but real estate will always continue and people will always have to live and retire somewhere, right?) so there should be no problem finding short-term tenants, as well as if you are looking to purchase in other areas of the U.S.
There are very important factors that one should consider when looking for an investment in a second home or rental property.
You must check with your accountant and understand the new tax laws and what is involved and its implications on the return on investment.
Remember, as I have mentioned a while back, you can use your Self Directed IRA or retirement plan to purchase real estate and you can even borrow against it and your lenders will recognize your retirement account as a viable entity to lend against as security. All your rental income, when put back in your retirement account, is tax deferred! However, discuss all the benefits with your accountant or financial advisor.
Stockbrokers don’t like this type of investment, since there is no benefit to them; and I believe a lot safer.
Each bank and/or lender may have varied rules, so it would be important to shop around to see who will provide the best interest rates on a secured account, as well as terms, conditions and closing costs (we can suggest and recommend several to assist you, if needed). It all boils down to your return on investment.
Be careful when searching for your investment/retirement property or second home. Always use a certified and licensed home inspector (we have several). You surely want to make sure you are not getting involved in a “Money Pit.”
Remember that 1986 movie, with Tom Hanks and Shelly Long, produced by Steven Spielberg?
If you have never seen it, or haven’t seen it in a while, it’s a must see and you will be laughing so hard throughout the movie. Make sure you use the bathroom before watching it. You will get an excellent education and fully understand why you always need to check out a potential purchase with a home inspector.
After seeing this movie, you will be much more cautious, moving forward. The current real estate market is still a great time to make an investment in rentals. Although rates have gone up over the last few weeks, now around 4.02 percent plus (check with your lender and shop it around).
Keep in mind that you can buy the rate down to below 3 percent, (each point will reduce your rate approximately an 1/8 of a point) and this will benefit you in the future if you hold the property long enough to benefit from the lower rate, after you pay for those points. Rates will vary depending on whether it will be your primary residence or vacation home. (you must have resided in that home for the two out of the last five years).
When you decide to sell, there are some technicalities, if you are using any part of the home for a business, so speak with your accountant, because you might have to recapture some of the depreciation on the home.)
However, if it is your primary residence, when selling, you still will receive a $250,000 exemption from income taxes, if single, or if married, a $500,000 exemption from income taxes plus what you originally paid for the home, plus any capital (permanent) improvements.
Having tenants, full or part-time, will enable you to have your mortgage and sometimes, all or part of your real estate taxes paid. The beauty of this situation is at the end someone has paid for your retirement or investment home.
Each one of your investment properties is like a 401K, that someone else is contributing to and as the recipient, you gain all the benefits and it gets paid for by your tenants!
Keep in mind to have the proper landlord Insurance package with an umbrella policy, which is not a lot of money for that extra coverage; and make sure your tenants have some type of tenant insurance to cover you in the event they cause any damage.
The insurance certificate should be in your name, as a person of interest or your corporation name as an amended insured. Real Estate, has always been the best vehicle to build your future wealth, bar none; unless you are an amazing stock investor for the long run or have a very profitable business.
The younger you are, the more leverage you have just because of compounding and the value of time as your investment increases in value.
Obviously, no can predict the future, but all things being equal and the world stays intact and we don’t, G_D forbid, blow ourselves up, real estate will continue to increase in value over the years that you are the owner.
When George Washington was president 242 years ago, a home was $1,000; and today that same home is $1,000,000 plus, depending on its location and of course school district too!
So, this is the best time of the year to search out and find an excellent investment/retirement property, for the competition tends to be less and the tire kickers and looky Lous are out for the winter.
Good Luck in your search and if you need any assistance, drop me a call.
If you have an opinion on this, please feel free to send an op-ed to the editor or drop me an email or a call.
Phil Raices is the owner/broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has earned the designations as a graduate of the Realtor Institute and is a certified international property specialist. He can be reached by email:Phil@TurnKeyRealEstate.Com or by cell (516) 647-4289 to answer any of your questions or article suggestions or provide you a free comparative market analysis on your property.
