Real Estate Rounds

Property in Bulgaria – Guide to Buying Property in Bulgaria

Thu, 11 Mar 2010 14:58:17 +0000

Guide to Buying Property in Bulgaria

Overview

Successfully looking for Real Estate in Bulgaria

As it emerges from years of semi-isolation behind the infamous Iron Curtain, Bulgaria is becoming a more and more attractive place for foreign nationals to make investments of different types in the real estate market. (With that said, and as will be discussed thoroughly later, a foreign national cannot presently directly own real estate in Bulgaria. The prohibition against direct ownership should be changed within the coming decade. And, in the interim, there are ways in which a foreign national can take title to real estate in a more indirect manner — which will also be discussed in detail shortly.)

Presently, the biggest demand made by foreigners when it comes to real estate in Bulgaria involves residential property. Many Europeans and individuals from some other countries around the world are buying Bulgarian residential property to establish holiday or vacation retreats.

Additionally, more and more savvy investors from different countries around the world are becoming more involved in the ownership of business or commercial real estate in some of the major cities in Bulgaria, most particularly in Sofia, the Bulgarian capital and Varna on the coastal regions of the Black Sea

Population: 7.97m

Currency: Bulgarian Lev
Capital:Sofia
Flag of BulgariaFlag of the European Union

Investment Property in Bulgaria

As mentioned, more and more international investors are putting money into real estate in Bulgaria for investment purposes. For example, these investors are buying real estate that is being developed for business and commercial purposes — especially in and around Sofia. (Once again, an investor needs to keep in mind that a foreign national cannot own real estate directly in Bulgaria at this time. Again, there are mechanisms available to deal with this prohibition that will be presented and discussed later.)

Another area in which foreign investors are becoming more active is in the purchasing of apartments or apartment complexes which are then being rented and leased to the influx of people that have taken to coming to Bulgaria to participate in the burgeoning economy of that country since it has become more fully integrated into the overall European community of nations.

Residential Bulgarian Property

As referenced, there are a significant number of overseas buyers who have taken to buying residential property in Bulgaria for holiday or vacation purposes. This includes people who have purchased elegant and substantial villas in different parts of the country as well as the more affordable and less costly apartments. In any case, Bulgaria is proving to be experiencing a sharp increase in the number of residences that are being sold to people who are looking for second homes for retreats, vacations or holiday homes in Bulgaria.

Finally, with many people moving to Bulgaria from other countries around the world, a great demand has been placed for the development of single family homes and houses as well as apartments in many parts of the country.

Residential Real Estate – Apartments in Bulgaria

Due to the prohibitions against foreign ownership of land in Bulgaria that likely will remain in place for approximately ten more years, many people are opting to purchase apartments. Because apartments normally are sold as units and without the conveyance of any actual land, a foreigner directly can purchase and own an apartment.

Throughout Bulgaria, apartment sales have been brisk with many people buying holiday apartments in the Black Sea resorts of Sunny Beach, Golden Sands, Nessebar as well as the Ski Resorts of Bansko, Borovets and Pamporovo. In addition, each year a significant number of new apartment complexes are being developed in all of the major cities in Bulgaria and in many more rural communities as well.

Again, due to the prohibition against the direct ownership of land by a foreign national, many people are opting for apartment ownership at this juncture.

Holiday Property in Bulgaria Resorts

As mentioned earlier, many foreign buyers have taken to seeking and purchasing real estate in Bulgaria for vacation or holiday purposes. One of the most interesting trends in the Bulgarian real estate market at this time involves the renovation of substantial residents — including breathtaking and historic villas and chalets — in different parts of the country. These magnificent properties are being restored to immaculate condition and are then, in many instances, being purchased (indirectly) by foreign nationals to be used as retreats, vacation or holiday destinations.

In addition to the trend towards the rehabilitation of older properties in Bulgaria, a significant number of new and off plan residential developments are under construction in many resort communities in Bulgaria. Bulgaria has worked diligently, through its government and through the private sector, to attract tourists and tourism money into that country over the course of the part five to ten years. Indeed, an ever growing number of people are finding themselves attracted to Bulgarian resorts and have begun to purchase (again, indirectly unless the residence is an apartment) real estate and residences being developed in this various resort communities in Bulgaria. Most Bulgarian real estate market analysts expect the trend towards the development of vacation-style residences to continue well into the next decade as an ever increasing number of people begin to discover Bulgaria and its resort destinations.

Specific Steps to Buying a Property in Bulgaria

Overview

Since it has emerged from behind the Iron Curtain, Bulgaria through its government has worked to bring that nation into the mainstream of international commerce. However, and with that said, Bulgaria remains in a period of transition when it comes to some commercial matters. This particularly is the case when it comes to the ownership of real estate by a foreign national within the borders of Bulgaria.

At the present time, the Bulgarian national constitution actually prohibits foreign nationals from directly owning land in Bulgaria. With that said, the governmental leaders in Bulgaria are in the process of changing the country’s constitution to allow for the direct ownership of land in Bulgaria by foreign individuals. The proposed constitutional changes likely will not be in effect until 2014 or 2015.

Understanding that a foreign national cannot directly own land in that country at the present time, this does not mean that a foreigner cannot own property in Bulgaria “indirectly.” In other words, if a person is interested in owning land in Bulgaria, there is an additional step that he or she will need to take in advance of making such a purchase and of assuming such ownership of real property.

Keep in mind that if a foreign national is interested only in purchasing an apartment — to which no land will be involved, to which any land outside of the apartment unit will be conveyed to the foreign national — direct ownership is, in fact, permissible.

If a person is interested in buying or investing in land in Bulgaria, and if that person is not a Bulgarian citizen, he or she will need to establish what is known as a Bulgarian Limited Company through which land in Bulgaria can be purchased and legally owned. In order to set up or establish a Bulgarian Limited Company, a person will need to plan on spending just under one thousand Euros. In most instances, a qualified real estate agent in Bulgaria should be able to offer this service to a foreign national.

Once this Bulgarian Limited Company has been established, the hunt for land/property to purchase can begin in earnest. At the time that a piece of property has been identified that a person is interested in buying, an oral offer to purchase is made to the seller. If the seller orally accepts a buyer’s offer, the next step in the purchasing process is the preparation and signing of what is known as a preliminary contract.

Customarily, in Bulgaria, at the time the preliminary contract is executed, a 10% deposit is placed or made by the buyer. Generally speaking, the deposit is non-refundable unless the seller withdraws from the contract or cannot, in the end, provide a clear conveyance of the property in question to the buyer. In other words, if the buyer pulls out of the deal, he or she will lose his or her deposit money.
In Bulgaria, perhaps more so than in many other countries in Europe and elsewhere in the world, it is imperative that a very thorough title search be undertaken. In addition, an independent survey of the property subject to the sale should be taken to ensure that the legal description of the property is, in fact, correctly stated. Unfortunately, Bulgaria has somewhat of a reputation of being a country in which titles to real property and survey descriptions are rather muddled in more than a few instances.

Once the title to the real estate is deemed clear, and once all other inspections and evaluations have been completed, the time will arrive for the signing of the final contract. This must take place in the office of a notary public. When the final contract is signed, all state and municipal taxes will need to be paid as well as the remaining balance due and owing on the real estate. After the final payment is made, the deed will be transferred into the buyer’s name, which in the case of a foreign national will be the Bulgarian Limited Company.

How to buy property in Bulgaria:

Bulgaria is one of the new boom countries for property investors – property is relatively inexpensive compared to neighbouring countries and certainly much better value than the developed economies of Western Europe.

Buying property in Bulgaria is a relatively straightforward procedure. We’ve broken the process down into a few simple steps – follow these and you’ll soon be the proud owner of a new property in Bulgaria!

1. Find your property

OK this is the fun bit – at http://www.property-abroad.com you can find an amazing range of Bulgarian property on offer from budget apartments to grand residences. Browse our site to find the property that suits your needs best but bear in mind the following:

If the property seems cheap by UK standards, it may indicate that it:

o Requires significant refurbishment.

o Is built in an older style

o It’s located in a remote area

o Only has an outside toilet

Many new developments, especially on the coast, are sold “off plan” which means that they are currently under construction. You need to ensure that the relevant terms and conditions are included in the preliminary contract – ask your legal advisor for assistance.

2. Set up a limited company:

Foreigners are permitted to buy buildings in Bulgaria but not land. If you are not a Bulgarian national, we recommended setting up a limited company that will then own both the real estate and the buildings on the land. If you are buying an apartment, it may not be necessary to form a limited company – check with the property agent whether a direct purchase is permitted.

While this law is expected to change when Bulgaria enters the EU in 2007, it is also the reason why Bulgarian property is currently so inexpensive compared with other European countries.

What is a limited company?

As shareholder in a limited company you are liable for the company’s financial commitments up to the value of your share in the company’s registered capital ie: if the company incurs any expenses or debts your liable is limited to the full amount of your investment in the company.

Who can set up a limited company?

Essentially anyone can form a limited liability company in Bulgaria – you do not have to be Bulgarian to do so. This enables foreign nationals to purchase Bulgarian property indirectly.

How do I set up a limited company?

Before signing any agreement you should agree with all the other shareholders what commercial activities the company will be involved with and agree the structure of the company.

Once you have all agreed on the nature of the business, the relevant documents for incorporation will be prepared by your legal advisor and signed by all the shareholders.

Next you will need to open a dedicated company bank account to collect all share capital.

The minimum share capital necessary to form a limited company is 5000 leva, of which a minimum of 70% (3500 leva) is required at the time of registration. As well as your share capital you will be required to pay administration costs for the registration. Don’t forget you will still have the money in the company.

Your limited company will officially exist as soon as it is added to the Commercial Register of the district court, in the region where the company will be based.

This entry is made as soon as the district court make a decision to permit the incorporation of your company.

When you submit your registration application you will need to provide the following documentation:

o Proof that each shareholder has paid into the company at least one third of the total amount of his or her financial interest, amounting to no less than 10 leva.

o Proof that at least 70 per cent of the registered capital has been paid.

o Articles of incorporation

o A memorandum relating to the appointment of directors

In order for any law to take effect, all Bulgarian legislation has to be published in the official Bulgarian state newspaper, the Bulgarian State Gazette. Publication of your company’s entry in the commercial register is a public declaration of your formation.

Finally, you will need to register your company with the National Tax Register Authority to complete the process of formation.

Following registration, once you have paid your entire share capital you can withdraw funds from the company to make your property purchase.

Now you’ve formed your company you can get on with buying your property.

3. Make sure you know about the taxes

In Bulgaria, as with pretty much everywhere else, property transactions are subject to tax. It’s important that you factor these charges into your financial planning.

Transfer taxes

Corporate tax (15% in 2005) is the only direct tax on the transfer of property. Because you are buying the property with your company you are liable for corporate tax.

Notary fees are payable on the transfer – rates vary but the maximum is around BGN3500.

Municipal fees of 2% of market value are also payable on completion.

Capital Gains Tax

There is no Capital Gains Tax on the profit when your company sells the property.

Local taxes and rates

Property tax is payable by anyone who owns a building or building plot. This is charged at 0.15% of the list value of the property.

If the building is on a municipal or State-owned plot, the value of the plot will also be included when tax is calculated

Local taxes are not payable on arable land

All building owners must also pay fees for waste collection

Value Added Tax

VAT of 20% is payable on all real estate transactions except with land and lease of property is for residential use.

The buyer or lessee can claim a VAT refund provide they are registered for VAT.

4. Put down a deposit on your property

Once you’ve found the property you want, you will need to place a deposit to reserve it. The deposit is usually 10% of the selling price and is refunded on completion of your purchase.

At this you will usually pay a commission to the property agent who will then take the property off the market while you begin the purchase. Check with the property agent regarding their fees and the terms and conditions they apply.

5. Sign an initial contract of sale

When the property agent receives all their cleared funds their solicitors will draft an initial contract, which contains details of all the relevant terms and conditions, monies paid and any other information relating to the property transaction.

Once this contract is signed, searches are carried out to make sure that the titles deeds are valid, that any relevant licenses and permissions are taken into consideration, that any debts on the title are brought to light, and that the terms of the final contract are agreeable to both buyer and vendor.

6. Sign the Notary Act

The last step in the buying process is to sign the Notary Act – essentially an official declaration that you have agreed to buy the property. At this point any state and municipal taxes must be paid and any outstanding balance of monies must be paid to the vendor.

The title deed of the property is then transferred into your company name.

Congratulations – you’re now the owner of a Bulgarian property!
Property Abroad always recommends using a Solicitor or Lawyer

Les Calvert – the Director of http://www.property-abroad.com writes articles and information on the overseas property market. Visit their site with useful information and properties for sale in Bulgaria http://www.property-abroad.com/bulgaria.

Author: Les Calvert
Article Source: EzineArticles.com
Provided by: Programmable Pressure Cooker

Property in Bulgaria – Guide to Buying Property in Bulgaria is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

The Perfect Storm – Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona

Thu, 11 Mar 2010 00:56:51 +0000

What Causes A Perfect Storm?

Well that’s the million dollar question, isn’t it?

What I deem a perfect storm is a set of circumstances that occur once, maybe twice in a lifetime that offers unparalleled opportunity to purchase undervalued real estate at unnaturally depressed prices. There was one similar opportunity in the late 1980s, early 1990s when the RTC (Resolution Trust Corporation – a government-run entity used to liquidate primarily foreclosed commercial assets) had one of the biggest fire-sales of commercial real estate in US history. This was a time that fortunes were made in the acquisition of overly distressed real estate assets. At that time, the market collapse was caused by 3 main factors (1) change in US tax laws affecting real estate investors, (2) Overbuilding, (3) The Savings & Loan banking scandal and fraudulent activity of mortgage lenders and appraisers.

So what’s causing the Perfect Storm Today?

(1) Massive residential property speculation in 2003-2006
(2) Too much credit available to purchase and finance real estate which was overused by lenders and uncreditworthy borrowers
(3) The current overall US market decline/recession that is spreading into a global crisis
(4) Current lack of funds for qualified borrowers
(5) Current oversupply of properties for sale

As you can see, there are 2 stages that follow one after another that lead to the creation of a Perfect Storm and opportunity to purchase real estate at incredible values – The Housing Speculation or Run-Up phase and the Market Collapse. We will examine each of these phases so you are more informed on what has led us to this perfect point in time to invest in real estate.

But first, we need to examine the most important issue a real estate investor must evaluate when choosing where and when to purchase a real estate investment – LOCATION.

Underlying Market Strength

I’m sure you’ve heard the age-old adage, “location, location, location”. I have a different spin on this saying. Mine goes more like, “location, timing, cash-flow”. Nevertheless, location is still number one on the list. If the underlying market is not strong with potential for rental and value increases in the future, then what’s the point of investing in the first place?

First, let’s look at Metropolitan Phoenix as a whole for location. Why the heck would you want to buy property in the middle of the desert?
Even though our market is severely depressed right now, Phoenix has shown remarkable resiliency and long term value appreciation for a number of reasons:

(1) Climate – People want to live here because of the warm, sunny weather. It is why snow-birds come in flocks for the winter and to retire. We all know that the baby boomers are reaching retirement age.
(2) Affordability – Phoenix is one of the most affordable places to live in the US. While this statistic took a temporary hit during the last boom, we have fallen back down to being extremely attractive to business based on real estate values, labor pool and overall cost of living. This will continue to attract business, labor and retirees to the area for the long term.
(3) Standard of Living – very high. Ease of commuting, and a fresh young, vibrant city leads people to want to live here.

These factors have led to the remarkable positive population growth Metro Phoenix has experience for the past 50 years. Even during times of economic hardship, people still continue to move here at a remarkable pace. This puts pressure on the housing market and inevitably leads to appreciation.

After deciding that Phoenix is the right spot to invest in real estate, your next task it to pick a sub-market within the metro region that makes the most investment sense. Some of the most important factors include:

(1) Area of greatest price declines
(2) Proximity to employment
(3) Proximity to amenities
(4) Quality of area
(5) Strength of rental market/values

These will be discussed later in this report and a qualified real estate professional can assist you in selecting sub-markets to invest in that match these criteria.

The Residential Housing Value Run-up

Phoenix real estate has always appreciated at a steady pace with the exception of a few massive run-ups in value followed by sharp declines. The decline of the late 1980s was briefly reviewed above. So what has caused the latest mass-speculation and run-up in values between 2003 and 2006?

Well there were a few culprits that acted together to create this latest debacle.

(1) Underlying Market Strength – As stated above, Metro Phoenix has inherent underlying market strength. That is what got the ball rolling and led to the mass speculation for 3+ years.

(2) Cheap Credit – Interest rates came down to unheard of levels making it easier to buy more assets with less money.

(3) Overabundance of Credit – It started in the late 1990s when Bill Clinton passed legislation freeing up credit to allow more people to buy homes – the sub-prime mortgage market was created. People that really shouldn’t have been buying homes in the first place were not only buying homes, but purchasing larger properties than they could afford. As credit loosened and values started to increase, a run on equity lines of credit and refinancing freed up the equity in people’s homes and allowed them to spend ‘invisible’ equity in the consumer markets on durable goods and services. This created the economic boom that we all experienced in the early to mid-2000s. The result: even homeowners that bought early in the boom and saw their property values increase 50-100% over a 5-6 year period had little to no equity left in their homes by the end of this appreciation cycle as they leached it all out through equity lines of credit and other borrowing methods.

(4) Investor Stupidity – As values went up and loans became easier to attain, investors started buying property with no money down and buying as many properties as they could get loans for (see next point below). It became an exercise in buy high and hope to sell higher.

It got to the point that, in 2005, there were actually busloads of investors that were driving around in town stopping in new housing subdivisions and lining up to buy new homes. Why did they concentrate on new homes? Because they could purchase a home to be built in the future, put little money down to secure it and watch the value of their property increase for 6-12 months without even owning it yet! Then they would either flip it right away when it was completed or hold it in hopes of it appreciating even more.

Builders were turning away buyers, holding lotteries and using other methods to hold back the swarm because they couldn’t build homes fast enough, even as they continued to raise prices on a monthly – sometimes even weekly basis! As a result, new homes were overbuilt in 2004, 2005 and 2006 by a wide margin due to ‘fake’ demand since many of the buyers were investors with no intention of ever living in the home!

This flawed philosophy worked for 2+ years at which time the greatest fool theory became a reality. You know how it works…As you build a pyramid of fools, there are less and less greater fools as you work your way to the top. When you finally reach the summit the greatest fool at the top looks around and sees no-one dumber than himself to buy his property for more money and so, the whole structure comes crashing to the ground. It took a while for owners of property who were trying to sell to realize that prices were in decline, not going up in mid 2006 which resulted in a massive number of listings coming on the market with few takers. This is further explained below under ‘The Market Collapse’.

(5) Lender & Investor Fraud – As the run-up in values was occurring, lenders and investors started to get greedy. Lenders began offering programs that made little or no sense for some homebuyers to get them into a home. Many times, putting a buyer into a home larger than they knew their client could afford with programs that their clients did not fully understand.

Credit was so loose and readily available during this time that many investors and homebuyers were fraudulently misreporting their income too high on ’stated income’, ‘no-doc’ loans and lenders were turning the other cheek and underwriting the loans with no clear proof of the borrower’s ability to repay.

The Market Collapse

So why did the proverbial %#$ hit the fan? Greed and loose credit were the culprits and it culminated when investors and homebuyers ran out of money to purchase and overall economy began to slow down as people started running out of capital and credit. As the real estate market began to slow down, property sellers remained steadfast in their belief that their home was worth more money than the current market value as it had been in months past. But it wasn’t.

From there, the first phase of the market collapse occurred. Overpriced properties for sale with no buyers. Property owners unrealistically priced their homes for sale too high and buyers began to pull off to the sidelines as they were unwilling to pay the exorbitant prices for homes. Listings began to pile up and very few sales were occurring. Some owners started to realize what was happening and dropped the price of their home to help it sell. As the market leveled off and began to slowly correct, phase two began…..

Investors that were counting on property appreciation soon realized that the end had occurred. They began putting property up for sale en mass further straining the supply side of the market. Because all these investors were buying property based solely on appreciation and NOT cash flow, they soon realized that they would be unable to hang onto their property if they didn’t sell them. Some tried to rent, but because they had paid so much for the homes, the properties were unable to cover the expenses. Some investors and homeowners hung on for longer than others, but almost all of them eventually gave in to the realities of declining property values.

This was further compounded by the variety of ‘flexible’ mortgages that were available to homebuyers and investors including shorter term, loans at lower interest rates. Investors planned on short hold times so naturally obtained lower interest loans with shorter terms as they planned to sell within 1-2 years. As the market declined and those property owners could not sell, these loans became due and because property values were declining, they could not get new loans to cover the value of the old loans. Many more property owners walked away for this reason and it continues today.

As the loans go into default due to non-payment, the owner is left with 2 ways out – short sale or walk away. Many went the route of short sale to minimize the affect on their credit rating and those who could not or would not go that route eventually walked away from their property and let the bank take the property back.

I have another article posted on this site detailing the Pros and Cons to purchasing Short Sales and Bank-owned Properties in Phoenix.

The market was soon flooded with distressed properties of all kinds. This forced home values down further and faster as distressed properties are typically aggressively priced at least 5-10% less than current market value. This cycle has continued to force values down for months to the point where most submarkets in Metro Phoenix have fallen 25-50% in the past 2 years. Some properties have fallen over 60% from their highs 2 years ago.

This has led to further problems in our region. Due to the extent of the downturn and the sheer number of vacant, distressed properties, Many properties are being vandalized by outgoing owners and theft is become much more widespread of vacant properties. This is further compounding the downturn as properties in poor condition are even harder to sell and must be discounted that much more in order to find a willing purchaser.

When Will The Housing Market Hit Bottom?

Good question. Here’s the answer…..

I have no clue. In fact, no-one does. But that’s’ not the most important thing. There is no way to know for certain when the absolute bottom is reached. All you can do is invest wisely NEAR the bottom. Purchase properties that produce positive cash flow (will be explained later), and wait to ride the wave back up.

Why Now?

There are several critical elements in evaluating the state of the residential real estate market and its proximity to turning the corner. Many of these criteria are now pointing to real estate values bottoming out. Here are some of the statistics I have been watching carefully which lead me to believe we are finding resistance that is creating a market bottom.

(1) Housing affordability has shot through the roof
(2) Residential Resales are on the rise
(3) Homebuilding is at a 25 year low
(4) Applications for new mortgages are on the rise

The biggest concerns that still remain are:

(1) The overall economy is weak and likely to get worse before it gets better
(2) Credit is harder to obtain and larger down payments are now the norm when buying real estate making it less available for more people
(3) Still too many foreclosures and short sales coming on the market from the frenzy of a few years ago.

Affordable Housing Is Back!

One of the best indicators on how attractive a specific real estate market is for homeownership is the affordability index. This is a measure of how affordable homes in a particular area are relative to wages and incomes. A number of 65-70 shows considerable value and favorable affordability for a large percentage of the population. As you can see, one of the driving forces of Metro Phoenix growth has always been housing affordability. In the speculation frenzy in the mid-2000s, that affordability plummeted to numbers never seen before. As prices have fallen, you can see the affordability coming back to the point where now, we are above our historical average.

*graph not available on this site*

Residential Resales are Picking up Steam!

As you can see from the following chart (unavailable on this site), sales activity is on the rise, although over 40% of the sales are currently lender-owned properties. This shows that we are starting to hit a resistance at the bottom as people are starting to grab the deals at the bottom of the market. If this trend continues, it could signal the slow-down in price declines and near-term stabilization of our home values.

For these reasons, while I believe we are near the bottom, I think it will be a few years before we see a marked improvement in our area where values begin to rise again. Will it happen? Absolutely! As I have attempted to explain above, the overall Metro Phoenix Market is very strong for numerous reasons and is poised to be a major growth region again – and not too long into the future, either.

So why not wait until things start turning around? Well, you certainly can, but there are 2 reasons why now is the ideal time to get involved.

(1) Abundance of properties (supply) – with so many distressed properties out there of all kinds, you now have your pick of what to purchase and can be more aggressive on price. As the market shifts more towards demand with more buyers chasing good deals, the number of opportunities will certainly diminish, it will be more difficult to find really good deals and there will be more competition to buy them.
(2) Positive Cash flow – prices are so low right now, that it is relatively easy to find residential properties that will produce a positive cash flow. Basically this means that the rental income should cover all the expenses and mortgage costs leaving you with money at the end of the day. This will be explained in greater detail below.

Why Residential Property?

Normally, I don’t recommend purchasing individual single family homes because they are harder to manage effectively and usually don’t cash flow. The major benefits that they have over other forms of real estate you could invest in are:

(1) Liquidity – Simply stated, there are more buyers for this form of real estate than any other. It is therefore easier to sell when needed for the greatest value.
(2) Appreciation Potential – for the smaller investor, it gives you the greatest potential for appreciation if purchased at the right time because there is such a broad market of buyers for housing
(3) Lower mortgage rates than commercial property investments, typically
(4) Values may have fallen 30-60%, but rents have not really fallen much at all.

In our current market, one of the major faults of residential property has been eliminated. It is now easier than it has been in decades to buy residential property in Metro Phoenix at a positive cash flow.

How Do I Buy Property?

I will begin this section by stating that these are my thoughts and suggestions when evaluating property for purchase based on my experience and common sense. These are guidelines that you may choose to follow at your own discretion. I cannot guarantee results or success for any investment. It is up to you to properly evaluate investment opportunities and make decisions in line with your goals and risk tolerance.

Picking the location

Here are important elements in selecting the area to purchase an investment property

(1) Safe area
(2) Close to highway access
(3) Within 30 minutes drive time of major employment centers
(4) Proximity to shopping and other amenities
(5) Proximity to schools
(6) Strong rental market – I mean with a track record of other properties being rented for rates which you can use to evaluate the viability of the property as an investment

Picking the type of property

These criteria are designed to reduce your liability and investment risk and maximize your upside potential. Size criteria is meant to keep the property in the range of properties that are easiest to lease, rent for the highest value per square foot and are also easiest to sell down the road since they conform to the largest market segment of potential buyers.

For Single Family Homes

(1) 3-4 bedrooms, 2+ baths
(2) 1,200 – 2,000 square feet with 2 car garage
(3) Newer homes are better. Try and stay with 1995 and newer
(4) NO pool/spa in backyard (too much liability and maintenance
(5) Low or No maintenance landscaping is preferable

For Condos

(1) Minimum 2 bedrooms 1.5 baths
(2) Decent amenities in complex (pool, spa, clubhouse)
(3) Stick with larger communities with 100+ units. If you’re looking at a smaller complex, make sure to verify the viability of the HOA and fees

The benefit to condos is less overall maintenance required – particularly on the exterior and to the community grounds. The downside is that they may appreciate at a slower pace than single family residential.

Evaluating the numbers

Even in the best worst market that we have to accumulate wealth through real estate, you need to be careful. There are as many, if not more bad deals out there as good deals. Properly evaluating a property will make all the difference between a success investment and an underperforming one.

Before getting to number analysis, let’s not forget evaluating the CONDITON of the property. We always recommend that you obtain a HOME INSPECTION on every home you plan to purchase to help insure that you are buying what you think you are buying.

Initial Analysis

Before placing an offer on a property, you want to perform an initial analysis to see if the property will generate a positive cash flow. In order to do this, you should have already been prequalified by a lender so that you know what down payment requirements you will have and what your finance costs will be. Once you know what those cost are, you are ready to evaluate the income and expenses.

Evaluating the INCOME is fairly straightforward. You will want to compare the going rental rates in the area for similar sized homes in fair to good condition and use a figure in the bottom ½ of the going rental rates to be conservative.

Analyzing EXPENSES is a bit trickier. There are a few items that you will need in order to verify costs and come up with a total expense amount. These may be broken down into the following:

Recurring Expenses

Property management – Figure 8-10% of the gross rent will be paid as management fees on single family homes. The more properties you have under management, the better the fee you may be able to negotiate with a management company.

Insurance – You will need to have enough insurance to cover the home and liability to cover accidents, having tenants in the premises. Make sure you have adequate coverage

Taxes

HOA Fees – Many single Family Homes in Phoenix belong to a homeowner association where fees are collected periodically for community maintenance. Please make sure to

Utilities – usually paid for by the tenant on single family residences, so you don’t have to worry about this. Check with you property manager for what is typical in their area
Legal/Accounting – many investors forget this one. Remember that you own and investment and need to make appropriate plans to minimize your liability and tax exposure. Please talk to legal and tax specialists for more information. The more property you own, the less this items costs per property since you can spread the cost over all your investments.

Maintenance Costs – you may have to pay someone to maintain the exterior of the home One of the main reasons to buy a home with no pool/spa and low-maintenance desert-style landscaping. Once a tenant is in, they are typically responsible for maintaining these areas.

VACANCY FACTOR – You will not always have a tenant in the property. You need to make allowance for time between tenants. If you price your rent aggressively for the market, 1 month per year as vacancy should be more than adequate.

One-Time Costs

These are costs you will incur in purchasing the property. You may bundle this into the total investment cost along with the down payment you intend to use. They will include:

Escrow fees and other closings costs
Home Inspection
Termite Inspection
Other Inspection Fees (if applicable
Finance Charges (for the loan)

You will be able to prepare an estimate for all these costs prior to putting in an offer on a property. Typically, you will have 10+ days after offer acceptance to run all inspections and tighten up all your figures to make sure your estimates were accurate. If you find something wrong with the home during this time, you will usually have the ability to cancel the contract and get back your earnest money. Speak with your Real Estate Professional for more information about the procedure of placing an offer on a property

Emergency Fund

It’s important to always have some extra money put on the side to cover emergency expenses, a tenant that skips out or is delinquent on payments, repairs costs, etc. Always be prepared for the unexpected.

Sample Analysis

Let’s work through an example so you may see how a typical investment might look on a single family home:

Our sample property is a single family home with 3 bedrooms, 2 baths and 1,400 square feet for $100,000. We will assume that you will need to put 30% down to purchase this home. A home like this is fairly typical in today’s market and might have sold for $180,000 – $200,000+ 3 years ago.

Total Purchase Price $100,000
Down payment (@30%) $30,000
Loan Amount $70,000

Closing Costs
Down payment $30,000
Escrow Fees $1,000
Finance Charges $1,500
Home Inspection $400
Termite Inspection $100
Total Closing Costs $33,000

Income
Monthly Rent $950
Less Vacancy Factor (1 month) $950
Annual Income $10,450

Annual Expenses (est.)
Taxes $800
Insurance $400
Property Management (@9%) $940
HOA fees ($50/month) $600
Maintenance/Repairs/Cleaning $450
Legal/Accounting $250
Total Annual Expenses $3,440

NET OPERATING INCOME $7,010

Annual Mortgage Payments (@ 7.5%) $5,874

Positive Cash Flow $1,136
Return On Initial Investment (ROI) 3.4%
return excludes appreciation

Condition Of Property

There are 3 different types of properties you can look at purchasing as an investment as it relates to condition.

Option A – Property In Good Condition & Ready To Rent

Option B – Property in fair condition but requiring cosmetic repair to make rentable. This is a property that might be bank-owned or otherwise vacant for a while. May have been heavily used or poorly maintained by the previous owner. Work required is more cosmetic in nature and easy to estimate. Things like carpet cleaning or replacement, new appliances, repainting, cleaning, landscape repair, drywall touch-up

Option C – Property in poor condition, requiring major repair and/or replacement. I only recommend this option for seasoned, experienced investors that have a background in home construction, repair and cost analysis. While you may be able to purchase property well below current market values and create instant equity by fixing them up, you can also lose your shirt if you don’t know what you are doing.

If you are a beginner real estate investor, I suggest you stick with option A until you get your feet wet and a little more experience with repair and replacement costs.

Be Pragmatic

Remember, it’s an investment. Be a Vulcan. Don’t exhibit emotions when dealing with buying a property or renting it to a tenant. The numbers have to make sense and the upside must be there. NEVER FALL IN LOVE WITH A HOME YOU’RE BUYING AS AN INVESTMENT. You will not be living in it. Think of it strictly as an income producing asset like a stock or bond. Make sure tenants are properly screened and qualified.

Property Management

It is important to have quality local management to oversee your investment. Yes, it cost more money to pay them, but they help maintain the value of your asset and save you from those calls at 3 am about a plumbing leak. Factor them into the numbers when evaluating an investment and don’t buy anything that doesn’t positive cash flow without management.

Why Not Commercial?

Commercial real estate like apartments, office, retail and industrial make excellent investments – if purchased at the right time. The consensus among leading real estate investment professionals is that this segment of the market has not bottomed out and likely will not for a while. The time to pick up distressed real estate investments in these asset categories may yet be 3-4 quarters away (from 4th quarter 2008).

Why? Because as the economy fails and the recession heads into full swing, many business eventually fail. This drives up vacancy rates and reduces asset performance while at the same time, reducing rental values as more space competes for limited tenants. Investors start demanding higher rates of return and factor in higher vacancy rates into their calculations of asset value driving the prices of property down. It usually takes some time for property owners to catch on to this market trend and reduce their asking prices to falling market values which further puts strain on values. This is the same scenario that has happened in the residential property arena in mid-to-late 2006 and into 2007. I suspect that there will be many commercial properties that enter default and revert back to the lenders creating opportunities for seasoned investors to purchase commercial real estate assets for very attractive values – but the time has not yet arrived. Patience is warranted in this area.

All rights reserved. No part of this publication may be reproduced or transmitted in whole or in part, in any form or by any means electronic or mechanical. Any unauthorized use, reproduction or distribution is strictly prohibited.

Legal Notice

While attempts have been made to verify information provided in this publication, neither the author nor the publisher assumes any responsibilities for errors, omissions, or contradictory information contained in this document.

This document is not intended as legal, investment or tax advice. The reader of this document assumes all responsibility for the use of these materials and information and is urged to do their own investigation prior to purchasing and/or investing in real estate of any kind. Celestial Homes Ltd, Prudential Arizona Properties and the author assumes no responsibility or liability whatsoever on behalf of any reader of these materials.

Ron Cuttler Prudential Arizona Properties 602-418-8800 ron.cuttler@pruaz.com http://www.CanadiansBuyArizona.com

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Sell Your Home, Boon Or Bane?

Thu, 11 Mar 2010 00:56:49 +0000

Who doesn’t want to earn money particularly in these days of recession? Homeowners who experience financial or personal problems sometimes sell their homes wrecked in failure. So, continue to read on this article and learn if selling your home is an advantage or not.

Selling your home would be a boon only if you have taught more about your situation and considered some alternatives. That’s why before you decide to sell your home, properly deliberate the reasons why you want to put your property on the market. Also, carefully evaluate the pros and cons and consider alternatives in selling your home.

These are some of the common reasons for selling a home and would help you do just that:

High value of your monthly mortgage interest payments for your home.

To resolve this problem, you can refinance your existing home loan as a reserve. If you have owned a house for several years and have not refinanced, perhaps you are ready to refinance at lower interest rates. You might extensively reduce your monthly payments, too. However, refinancing will reset the clock on your home loan. This may cost you money over a period of time. Thus far, it is worthwhile doing some calculations.

Not enough funds to improve your home.

If you stumble upon this problem, you can apply for a home renovation loan or refinance as an effective OPTION to sell your home effectively. Renovating and improving your home can help to increase its market value. This could give you surety that your decision to sell your home is a good venture.

On the other hand, in every gain, failure has its niche as well, to complement your sale. In this case, increase in value of your home may also increase the amount of property taxes you pay based on the laws in your country.

More space than is in your current home and that is the reason why you would like to sell your home.

Remodeling your existing home before buying a new property is one considerable resolution to settle this problem. A more open-plan approach may give more living space. Think about adding, or enlarging a bedroom or bathroom to your current home.

In this sense, it would improve the resale value of your home. It will save you real estate agent’s fees and other costs associated with moving house as well. You might need to use your home equity to finance the project. However, there is the risk of over-improving your property. You might not succeed to regain your investment when you come to sell your home.

When deciding to sell your home and getting into a situation of indecisiveness can be very provoking and can cause pointless stress. Not making a decision, or making the wrong decision, also has its weakness. With awareness, weigh your reason for selling your home – think about the alternatives – then consider the pros and cons before you speed up in putting your house on sale. Remember; no matter what your reason for wanting to sell your home, it frequently pays to speak your ideas with a financial advisor. Considering these reasons for selling your home would definitely answer this question; is selling your home a boon or bane? No hanging back, the answer is in your reach. Sell your home now and overshadow the weaknesses and convert your property to wealth!

http://www.quick-home-sale.net

Author: Renato Pastorizo
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Sell Your Home, Boon Or Bane? is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

Which real estate companies are best for new agents?

admin — Thu, 11 Mar 2010 00:09:35 +0000

I’m planning on getting my real estate agents license in the next few weeks. I’ve heard that Century 21 and some other companies have their own courses. Is it better to attend their course or just a regular local real estate school. Also what companies are good for new agents.

Any advice you can give is appreciated! Thanks!

Oh and I’ll be getting my license in Tenessee.

Which real estate companies are best for new agents? is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

The Perfect Storm – Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona

Wed, 10 Mar 2010 00:41:21 +0000

What Causes A Perfect Storm?

Well that’s the million dollar question, isn’t it?

So what’s causing the Perfect Storm Today?

But first, we need to examine the most important issue a real estate investor must evaluate when choosing where and when to purchase a real estate investment – LOCATION.

Underlying Market Strength

(1) Area of greatest price declines
(2) Proximity to employment
(3) Proximity to amenities
(4) Quality of area
(5) Strength of rental market/values

These will be discussed later in this report and a qualified real estate professional can assist you in selecting sub-markets to invest in that match these criteria.

The Residential Housing Value Run-up

Well there were a few culprits that acted together to create this latest debacle.

(1) Underlying Market Strength – As stated above, Metro Phoenix has inherent underlying market strength. That is what got the ball rolling and led to the mass speculation for 3+ years.

(2) Cheap Credit – Interest rates came down to unheard of levels making it easier to buy more assets with less money.

The Market Collapse

I have another article posted on this site detailing the Pros and Cons to purchasing Short Sales and Bank-owned Properties in Phoenix.

When Will The Housing Market Hit Bottom?

Good question. Here’s the answer…..

Why Now?

(1) Housing affordability has shot through the roof
(2) Residential Resales are on the rise
(3) Homebuilding is at a 25 year low
(4) Applications for new mortgages are on the rise

The biggest concerns that still remain are:

Affordable Housing Is Back!

*graph not available on this site*

Residential Resales are Picking up Steam!

So why not wait until things start turning around? Well, you certainly can, but there are 2 reasons why now is the ideal time to get involved.

Why Residential Property?

How Do I Buy Property?

Picking the location

Here are important elements in selecting the area to purchase an investment property

Picking the type of property

For Single Family Homes

For Condos

Evaluating the numbers

Initial Analysis

Analyzing EXPENSES is a bit trickier. There are a few items that you will need in order to verify costs and come up with a total expense amount. These may be broken down into the following:

Recurring Expenses

Insurance – You will need to have enough insurance to cover the home and liability to cover accidents, having tenants in the premises. Make sure you have adequate coverage

Taxes

HOA Fees – Many single Family Homes in Phoenix belong to a homeowner association where fees are collected periodically for community maintenance. Please make sure to

One-Time Costs

These are costs you will incur in purchasing the property. You may bundle this into the total investment cost along with the down payment you intend to use. They will include:

Escrow fees and other closings costs
Home Inspection
Termite Inspection
Other Inspection Fees (if applicable
Finance Charges (for the loan)

Emergency Fund

Sample Analysis

Let’s work through an example so you may see how a typical investment might look on a single family home:

Total Purchase Price $100,000
Down payment (@30%) $30,000
Loan Amount $70,000

Closing Costs
Down payment $30,000
Escrow Fees $1,000
Finance Charges $1,500
Home Inspection $400
Termite Inspection $100
Total Closing Costs $33,000

Income
Monthly Rent $950
Less Vacancy Factor (1 month) $950
Annual Income $10,450

Annual Expenses (est.)
Taxes $800
Insurance $400
Property Management (@9%) $940
HOA fees ($50/month) $600
Maintenance/Repairs/Cleaning $450
Legal/Accounting $250
Total Annual Expenses $3,440

NET OPERATING INCOME $7,010

Annual Mortgage Payments (@ 7.5%) $5,874

Positive Cash Flow $1,136
Return On Initial Investment (ROI) 3.4%
return excludes appreciation

Condition Of Property

There are 3 different types of properties you can look at purchasing as an investment as it relates to condition.

Option A – Property In Good Condition & Ready To Rent

If you are a beginner real estate investor, I suggest you stick with option A until you get your feet wet and a little more experience with repair and replacement costs.

Be Pragmatic

Property Management

Why Not Commercial?

Legal Notice

Ron Cuttler Prudential Arizona Properties 602-418-8800 ron.cuttler@pruaz.com http://www.CanadiansBuyArizona.com

Author: Ron Cuttler
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The Perfect Storm – Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

How I Learned to Sell My House Fast!

Wed, 10 Mar 2010 00:41:13 +0000

I had been trying to sell my house for over two long years before I discovered how to sell my house in 7 days or less. I had a house in another state in which I no longer lived. In addition to the house I lived in, I was paying a first and second mortgage, utilities, taxes and outrageous rates for vacancy insurance month after month while my house sat empty and unsold. The house was bleeding my bank account to death, especially when the real estate and credit market started to go downhill.

Before I moved, I tried to sell my house myself “For Sale by Owner” (FSBO) with no luck. I had no idea how to effectively market my house to generate buyer interest, how to get them financed, how to complete the purchase and sale paperwork and the like. After I failed to sell my house myself, I listed the house with 4 different Realtors for six months each. They told me the that my house was beautiful, that they could sell my house fast and get top dollar. They promised me that they would market my house in the paper, magazines, on the MLS and do multiple open houses and more. In reality, they barely lifted a finger. They listed my house on the MLS, put a sign in the yard and forgot about my house. They did no open houses as promised, advertised in no magazines and never showed the house. I lost two years worth of mortgage payments, taxes and utilities that I will never recover.

Perhaps you’ve found yourself in a similar situation. Perhaps you are making two house payments, trying to sell an ugly house, in foreclosure, bankruptcy, going through a messy divorce, dealing with the death of a loved one, lost your job, had an extended illness or just can’t afford to make your house payments anymore. Perhaps you too have tried to sell your house on your own or through a Realtor with no luck. Regardless of your reasons for wanting to sell your house fast, there is a better way to sell without trying to sell your house yourself or listing through a Realtor. You can sell your house in 7 days or less and here’s how…

I was searching the Internet one day looking for yet another Realtor to list and sell my house when I came across a local company that claimed to buy houses in 7 days or less. Perhaps you’ve seen some of those local “We Buy Houses” people or companies in your neighborhood. I called the home buyer and he said that they were indeed a local, professional home buying company that buys houses in any area, condition or price range, in 7 days or less, for investment purposes. He said they could pay me all cash, take over my mortgage payments and close quickly if needed. He said that if my house qualified, they could buy my house fast allowing me to sell my house in 7 days or less!

We made an appointment for him to come out and inspect my home within the next 48 hours. He loved my house and said it was exactly the type of home that he and several of his customers were looking for. He made me 2 different offers to purchase my home on the spot. One was an all cash offer to buy my house below current market value. This offer would have netted me about the same amount I would have made had I listed and sold through a Realtor. The second offer was to give me some cash now, take over my mortgage payments and cash me out of my mortgage and remaining equity later when he was able to resell my house to a new buyer. This offer would give me a higher sales price, some cash now, immediate debt relief from my mortgage payments and the rest of my cash later. If I had not been trying to sell my home for two years, I would have taken the 2nd offer. However, because I had been trying to sell my home for so long, I took the cash offer and netted the same amount I would have likely made if I had sold through a Realtor. The home buyer handled all the paperwork and we closed later that week with a local real estate attorney. My house was bought and sold in 7 days or less! Man, I wish I had met these guys two years ago!

If you too have an unwanted house you need to sell fast for any reason whatsoever, I recommend you contact one or more local, professional home buyers in your area before you list your house with a real estate agent or try to sell “For Sale by Owner”. You owe it to yourself to see what these folks have to offer before you lock yourself into a six month listing agreement with a real estate agent and end up waiting two years and thousands and thousands of dollars later to sell your home for the same amount you would have likely netted to begin with.

I found my local professional home buyer at www.WeBuyHouses.net and you can too. Just visit their website and complete their online questionnaire to contact a professional home buyer in your area. You have everything to gain and nothing to lose by talking to these folks. By selling to a professional home buyer is how I sold my house in 7 days or less and how you can sell your house fast too!

Author: D. Griffin
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How I Learned to Sell My House Fast! is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

What can a real estate agent and broker require you to sign in a real estate deal?

admin — Tue, 09 Mar 2010 21:28:10 +0000

I am in escrow on some property in which the seller and his real estate agent were not very forthcoming in their disclosure statements. Through a third party I found out some things about the property that are detriments (such as occassional flooding) but I am willing to overlook them and still purchase the property. I have released all my contingencies and we have a close date set.

My real estate agent happened to tell the seller’s real estate agent that we found out some of these things on the property – most importantly about the flooding – and now the selling real estate agent wants me to sign a bunch of documents listing out what I found out as if she had told me about them. I don’t want to do it – it took considerable effort for me to uncover these issues and I have already signed off on contingencies. I don’t think I need to also let her off the hook as if she had disclosed these things to me – she did not. Can the realtor force me to sign these?
I am asking if a real estate agent can legally force me to sign informal and misleading documents in order to progress with the purchase? The seller and I have already signed all legal documents as outlined in our legal contract.

What can a real estate agent and broker require you to sign in a real estate deal? is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

Buying In Spain – The Most Important Facts You Should Know!

Tue, 09 Mar 2010 14:57:08 +0000

Nothing is more stressful than moving house, but moving abroad is a triple-whammy!

Here are a few facts and advice on the subject for those thinking or currently in the process of buying a property in Spain.

The Legal System

Span’s legal system in the field of property is quirky and difficult to comprehend. Recently many scandals have surfaced due to a lack of understanding or communication by both buyers and the various legal parties involved with a property deal. Not doing your research here may land you in the lap of an unscrupulous company or representative. Not a place you want to go!

But not only will there be mountains of legal paperwork to wade through, but a buyer should obtain a VERY good and reputable lawyer to overlook critical and essential matters.

Always make sure that you DO have a lawyer, and find one upon recommendation who actually lives and works in Spain. This will give you the best chance of being represented by someone who has the best experience in the country’s laws and culture.

Although you may think that agents, lawyers and developers all work individually, beware! Some are happily raising profits by networking with each other, meaning that you are simply a fish to catch, and all advice given to you may be done so in their collaborative favour. So make sure your lawyer works independently. This is to ensure that he will provide his service in your best interests alone, and is not acting arbitrarily on behalf of a developer or estate agent. Seek independent advice at all times from various sources and indeed, as many different sources as you possibly can.

A Community Development

A development may consist of an entire community. These may be built as villas, townhouses or apartment blocks. A development may also include gardens, communal areas or a pool. Once you buy into a community you will be responsible for paying a fixed sum or community fee (as arranged by the community’s president). This is usually paid on a monthly basis, and covers the general costs of upkeep. This rule obviously does not apply if you buy a completely detached property with your own set boundary. Check before buying into a community exactly what your expected to pay, as you may be suprised at how high some of these community fees can be for the more prestigious and larger complexes.

Development Company

A development company will be the persons in charge of the building and construction of the project. You must check out a development company very carefully and if you buy an off plan property, get your lawyer to make sure that the company has all the relevant build permissions and licences in place for the project. Some development companies have a notorious reputation of building on certain ‘zones’ or ‘unlicensed’ areas for which they have no written permission to construct.

This is already a major problem occuring all over the coast of Spain today. as buying into an illegally built consruction could, at worst, result in you losing your property entirely through a demolition order by the council. Â Many brits today are in fear of facing this type of harranguing ordeal. Make sure its not you.

Checking out /buying a property.

Be wary of estate agents which might use common marketing skills to win you over. Do not be fooled by the statement: ‘They are nearly all sold out; you’ll have to snap one up quickly.’ It’s a common line to use. and how would you know if that were true? Don’t be concerned with this type of sales talk. If you are being coerced into a quick sale, it’s usually because something is wrong!Anyone can be an ‘estate agent’ in Spain, and some don’t even have half the credentials to prove it, They may simply have experience in working on a commission basis for a timeshare company. The standards in the UK differ vastly to that of property buying in Spain, so check out their company as a prerequisite, if you are interested in any property in their books.

It is extremely important to view the property you want to buy, and check all the details concerning its construction. Obviously, you cannot check a building if it hasn’t yet been built (off-plan), but you can visit the site and check the plot on which they intend to construct it. Do not rely on architectural drawings and the pictures displayed inside glossy brochures alone. These are often grandly designed to tempt you into buying quickly without checking all the relevant facts associated with a purchase.

I was once very impressed with a glossy brochure in my mailbox, offering a selection of eighty townhouses that were to be built over a three year period. I eventually decided not to invest in an off plan deal, however I drove by the plot out of curiosity. The entire build area and each individual unit had been marked out in chalk.

I was horrified to find that the plots were much smaller than appeared in the glossy brochure! ALWAYS check out the site or plot before buying off-plan.

Cynically view the boundaries surrounding the property or the plot you wish to buy, making sure the developer is not intending to build another site just outside your bedroom window, or destroy the scenic view which sold the house to you in the first place! The local town halls planning department will be able to give you information on whether any of the surrounding area of your property is tipped for development or not.

Building materials can sometimes be of a lesser quality in order to cut costs, have your lawyer check this out thoroughly, including obtaining a surveryors opinion. Best advice again is to use an independent surveyor not associated with the developers or the project.

Utilities

Obtaining utilities is one of the most controversially difficult legal issues to address in Spain. It is not uncommon to purchase a property where there is no correct infrastructure for electricity cables or water pipes in place. Make sure that you CAN have these amenities once the project is finished. One family moved in, only to find they couldn’t get a proper electricity line due to a legal wrangle with a neighbour, who refused that their cables cross through his property! Their only resort was to lay cables via the other side of their property – over an entire mountain!

It is important to learn that once you have completed and paid for the property, any problems regarding utilities then become yours to deal with. If there is a legal issue with the construction of which you haven’t been made aware, once you complete all parties to which you handed over your hard-earned cash will simply walk away. You will then have to fight for your own rights through lengthy court proceedings and the local council, which is a path you simply do not want to tread!

The Licence of First Occupation.(LFO)

This very important licence is issued by the local council once the project is finished and has been approved. It states that the development is habitable, or fit for occupation. Under NO circumstances should you complete a purchase without this Licence. No Licence means no water or electricity, or even sometimes gas fittings or a telephone connection. Thousands of buyers, like myself, have been conned by lawyers, estate agents and development companies, by completing without this necessary piece of paper, (sometimes under the premise that it will be forthcoming soon).

In northern Spain an entire illegally built development (housing over fifty residents) had been left stranded for almost two years without an LFO. Even though the developers provided a temporary utility supply to the community, it was minimal and precarious at best. To make matters worse, the developers eventually upped and left, taking the supply with them. The occupants were then left in the horrifying predicament of having to collect water from a local stream! The bottom line here, is that council will not issue an LFO to an illegally built development, and electricity and water companies will not serve you a contract without it.

So the simple rule is NO LFO – NO COMPLETION! If your lawyer is pressing you to complete before this licence is issued he is not acting in your best interests. Some lawyers may be in a hurry to complete the project on behalf of the developer and perhaps also to finish the deal to obtain his own fees. Unfortunately, I ignorantly completed my property purchase without the LFO in place and spent seven months fighting for proper utility connections because of it. Don’t be fooled into thinking that the Notary Office (where the signing and completion always takes place) will intervene without it. They won’t!

It is fair to say that thousands of foreign investors sail through purchases without hiccups or major problems, unfortunately though, just as many also run blindly into varying catastrophic and financially devastating property-buying disasters.

It is not a matter of ‘don’t’ buy a property in Spain, it is a matter of ‘be very cautious’. The best way to go about ensuring that you do not become embroiled in an awful predicament is to never take anything for granted or act in impulse. Do your research and above all speak to anyone who has gone through the process before you!

Online forums are a great place to start. You will receive practical and helpful tips on all aspects related to buying property in Spain. But be warned, some are full of horrendously off-putting experiences.

Carla Acheson is a freelance writer for a variety of subjects, mainly the independent music industry. She is the Editor of www.incite-ezine.co.uk [http://www.incite-ezine.co.uk], and the Assistant Editor for news site Indie News Live.com

Author: Carla Acheson
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Buying In Spain – The Most Important Facts You Should Know! is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

Rent to Own Offers Australian Real Estate Buyers a Great Alternative Option

Tue, 09 Mar 2010 05:54:09 +0000

Everyone needs a place to live. Traditionally, here in Australia, that statement has meant that you simply had one of two choices – rent a place or own one. However, there is now a third option available to you known as rent to own.

What is rent to own?

Typically you either own your home, or at least pay a mortgage payment on it each month as you are paying off your loan from the bank, or you pay your landlord rent on their property that they themselves own. In the first scenario, you eventually own your home free and clear from the bank. Additionally, as each month passes you gain equity, in the form of money, in your property and should you decide to sell it at a later date you walk away with that cash. In the second scenario, you are simply paying rent to allow you to live in the home from month to month. When you are renting you do not gain any equity or interest in the property whatsoever. And, when you choose to move out you have no equity you can cash out and take with you.

In a rent to own scenario you are renting property from the owner, but you are doing so with a portion of your monthly rental payment going towards your down payment on eventually buying the property. Typically, the amount of your down payment credit in a rent to own situation is about 20%-30%. This means that if you pay $1000 per month in rent, then $200-$300 of your payment each month is a credit for your down payment. Using these numbers as an example, then in a year’s time you would then have $2,400-$3,600 towards your down payment, which you would not have if you were simply renting. The rent to own credit continues to accrue each month and so you could easily have a nice sized down payment in even just two to three years in this scenario.

Who can take advantage of a rent to own scenario?

The option of renting to own can be taken advantage of by people in a variety of different situations. Perhaps you have less than stellar credit, but you want to own your own home rather than keep throwing your money away in rent each month. Perhaps you are moving for a work related reason and you think that you want to purchase a particular property but are not positive of the area. Perhaps, you just don’t have any liquid cash available for a down payment on the property you want to purchase. There are many situations where rent to own makes sense for you as a real estate buyer.

Can someone with bad credit buy a home through the rent to own process?

Many people get into debt with credit cards, or find themselves in over their heads financially for one reason or another. Traditionally, this has meant that they are unable to purchase a home because they are unable to secure a mortgage from a lender. In a rent to own situation, you do not have to secure a mortgage right away and can take some time correcting your negative credit issues while still building up a down payment at the same time.

The reality of life today is that it is hard to get ahead, and it is hard to pay your rent and save for a down payment to purchase a home at the same time. The good news is that renting to own allows you the option of a place to live and the ability to use part of your monthly rent payment towards your down payment all at the same time; rather than tossing away your money in rent each month. You are paying for your place to live and you are building a nice credit for that down payment a lender is going to require in order to lend to you.

P. Sharp is a real estate specialist and has spent years and years helping families in Australia find their dream homes and, more importantly, actually own them. Thus far, he’s found the rent to own scheme the best way to own a home without greatly impacting a family’s finances.

New families can begin searching for their dream home by looking at the properties listed on his website http://www.ownyourhome.com.au/properties.aspx.

Author: P. Sharp
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Rent to Own Offers Australian Real Estate Buyers a Great Alternative Option is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing

The Perfect Storm – Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona

Tue, 09 Mar 2010 00:19:54 +0000

What Causes A Perfect Storm?

Well that’s the million dollar question, isn’t it?

So what’s causing the Perfect Storm Today?

But first, we need to examine the most important issue a real estate investor must evaluate when choosing where and when to purchase a real estate investment – LOCATION.

Underlying Market Strength

(1) Area of greatest price declines
(2) Proximity to employment
(3) Proximity to amenities
(4) Quality of area
(5) Strength of rental market/values

These will be discussed later in this report and a qualified real estate professional can assist you in selecting sub-markets to invest in that match these criteria.

The Residential Housing Value Run-up

Well there were a few culprits that acted together to create this latest debacle.

(1) Underlying Market Strength – As stated above, Metro Phoenix has inherent underlying market strength. That is what got the ball rolling and led to the mass speculation for 3+ years.

(2) Cheap Credit – Interest rates came down to unheard of levels making it easier to buy more assets with less money.

The Market Collapse

I have another article posted on this site detailing the Pros and Cons to purchasing Short Sales and Bank-owned Properties in Phoenix.

When Will The Housing Market Hit Bottom?

Good question. Here’s the answer…..

Why Now?

(1) Housing affordability has shot through the roof
(2) Residential Resales are on the rise
(3) Homebuilding is at a 25 year low
(4) Applications for new mortgages are on the rise

The biggest concerns that still remain are:

Affordable Housing Is Back!

*graph not available on this site*

Residential Resales are Picking up Steam!

So why not wait until things start turning around? Well, you certainly can, but there are 2 reasons why now is the ideal time to get involved.

Why Residential Property?

How Do I Buy Property?

Picking the location

Here are important elements in selecting the area to purchase an investment property

Picking the type of property

For Single Family Homes

For Condos

Evaluating the numbers

Initial Analysis

Analyzing EXPENSES is a bit trickier. There are a few items that you will need in order to verify costs and come up with a total expense amount. These may be broken down into the following:

Recurring Expenses

Insurance – You will need to have enough insurance to cover the home and liability to cover accidents, having tenants in the premises. Make sure you have adequate coverage

Taxes

HOA Fees – Many single Family Homes in Phoenix belong to a homeowner association where fees are collected periodically for community maintenance. Please make sure to

One-Time Costs

These are costs you will incur in purchasing the property. You may bundle this into the total investment cost along with the down payment you intend to use. They will include:

Escrow fees and other closings costs
Home Inspection
Termite Inspection
Other Inspection Fees (if applicable
Finance Charges (for the loan)

Emergency Fund

Sample Analysis

Let’s work through an example so you may see how a typical investment might look on a single family home:

Total Purchase Price $100,000
Down payment (@30%) $30,000
Loan Amount $70,000

Closing Costs
Down payment $30,000
Escrow Fees $1,000
Finance Charges $1,500
Home Inspection $400
Termite Inspection $100
Total Closing Costs $33,000

Income
Monthly Rent $950
Less Vacancy Factor (1 month) $950
Annual Income $10,450

Annual Expenses (est.)
Taxes $800
Insurance $400
Property Management (@9%) $940
HOA fees ($50/month) $600
Maintenance/Repairs/Cleaning $450
Legal/Accounting $250
Total Annual Expenses $3,440

NET OPERATING INCOME $7,010

Annual Mortgage Payments (@ 7.5%) $5,874

Positive Cash Flow $1,136
Return On Initial Investment (ROI) 3.4%
return excludes appreciation

Condition Of Property

There are 3 different types of properties you can look at purchasing as an investment as it relates to condition.

Option A – Property In Good Condition & Ready To Rent

If you are a beginner real estate investor, I suggest you stick with option A until you get your feet wet and a little more experience with repair and replacement costs.

Be Pragmatic

Property Management

Why Not Commercial?

Legal Notice

Ron Cuttler Prudential Arizona Properties 602-418-8800 ron.cuttler@pruaz.com http://www.CanadiansBuyArizona.com

Author: Ron Cuttler
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The Perfect Storm – Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona is a post from: Real Estate Rounds - Tips For Buying, Selling, & Investing