Important Announcement

I am pleased to announce that I am now affiliated with Red Realty in Smyrna, Tennessee.  It was a hard decision to make, but I feel that I will be able to serve all my clients and customers positively and professionally through this company.

I will still focus on residential clients, but will also have the ability to serve commercial and industrial clients through Red Realty.  If you have any questions, please feel welcome to contact me at (615) 477-8483 or by email  broth@realtracs.com.

I look forward to helping you in any future real estate transactions.

It’s a Buyers Market

There’s no doubt that we have a buyers market in real estate today.  With the lending crashes and rampant foreclosures, times are tough on homeowners.  But let’s look at this in realistic eyes.

Over the past months, there’s been more and more foreclosures, doom and gloom in the media about the housing market, but home buyers have to understand that this isn’t the golden carrot hanging in front of them.  Many of my colleagues and I are starting to see some ridiculous offers on homes for sale.  Buyers have to be aware that while yes – they want to get the best price possible – there is a realm of reason that must be present.

If you want to offer extremely low prices that probably won’t be accepted by any rational home seller, then make the offers on a bank-owned property so you don’t waste your time or the sellers time.   Put yourself in the sellers position.  Many sellers are taking job transfers and have to sell their home, so they can’t afford a ridiculous offer.  To waste your time, the Realtors time, and the home owners time making an offer that probably won’t go through, it’s costing everyone money, gas, and time.

This is where your Realtor comes in.  We can run the numbers and find a good median point to where the offer can flow into a contract.  By offering a ridiculously low price, you’re not only telling the homeowner that his house isn’t very nice, but you also make them question why you want to buy it in the first place.  If you’re going to buy a home to live in, you have to plan on what it’s going to be down the road.  Whether you live in the house a few years before you take another job or transfer or move up, or if this your home that will last 10 to 15 years or maybe longer, real estate is a long-term commitment.  Investors will risk their money in short-term investments, but homeowners should secure their money in long-term investments – just like in the stock market.

Don’t insult the seller.  Don’t waste your time.  None of us want to leave money on the table, but don’t kill a deal before it ever gets started.

How to Keep Your Home Cool Without Getting Hot Under the Collar

I just helped fellow agent Kathy write a post for Banks.com about how to keep your house cool in the worst heat of the summer.  Here’s a link to the post, but some tips:

• Turn your thermostat on the water heater down to 105 degrees (from 140 range) to save energy.  You won’t notice a difference in the shower, but you will on your utility bill.
• Use compact fluorescents for your lighting because this reduces the power you use, plus the bulbs put out less heat.  A 23-watt compact flueorescent puts out the same light as a 150-watt incandescent – that’s bright!  Watts equal heat, so on a 23-watt you can touch, but a 150-watt will take your skin off from the burn, therefore your energy bill is reduced.

Go read more tips that we came up with at Banks.com.

Creating “Wake-Up” Money for College Savings

Financial freedom occurs when your annual investment income (your money at work) exceeds your annual lifestyle expenses.  At this point, you have “Wake-Up Money.”  Wake-up money can also be used to pay for the future educational needs of your children or grandchildren.  Here are 10 tips for creating a real estate investment savings option. 

1. Buy residential properties – houses and condos. Stay away from land and commercial real estate unless you are an experienced investor or are buying as a business “user.”
2. Buy “mainstream” houses and condos. Buyer properties that are at or below the average sales price. Buy properties that appeal to most buyers. Avoid high priced or unusual properties. Buy houses with at least three bedrooms and condos with at least two. If possible, buy properties with a garage.
3. Don’t buy with partners, unless you have to. If you have to have partners, make sure they have the same goals and values, are of similar age, and have job, geographic, and marriage stability.
4. Believe in the long run.  Real estate markets are cyclical but the long term trend has been up. Hnag in there for the long run. The great investor’s lament is “I should never have sold that property.” The other investor’s lament is, “I could have bought that property for $xxx!”
5. Take care of your property and it will take care of you.  It’s your “golden goose.”  If you don’t like property management or are too busy, either hire a professional property management firm or buy condos or townhouses. They take a lot less management. The homeowner’s association takes care of most of the property maintenance.
6. Get started early.  Put time on your side. Albert Einstein was once asked what he thought was the most powerful thing in the world.  His reply, “compound interest.”  Don’t wait to buy real estate.  Buy real estate and wait!
7. If you don’t have the money, make a plan and commitment to get it.  Consider borrowing your investment money out of the equity in your personal residence.
8. Know your “enough.”  How much investment money do you need?  Know when you are ready to stop accumulating property and start paying off what you have – and enjoying life!
9. Work with knowledgeable people. Pick Realtors, accountants, attorneys, and property managers who know what they are doing.
10. Have a goal and a plan. Contact your agent and begin to develop a customized plan to start creating investment wealth.

Even if your child or grandchild does not go to college, you have still created “wake up money” for your own retirement.

Buying Rental Property Has Benefits

With foreclosures on the increase (read: Rampant) right now, people who are losing their homes also have to find a place to live and are turning to rental properties to move their families.  This opens a great opportunity for potential buyers with good credit and down payment money to create wealth through residential real estate investment.  Whether you’re looking to have wake-up money in your retirement years or starting a college fund for your children or grandchildren, real estate in the long run is one of the best investments there is.

I shared this list with my friend Kathy who has published it on Banks.com.  We’re telling a national audience about the Benefits of Residential Real Estate Investments, and I wanted you to hear about it too.

1. Cash Flow.  The rent provides income.  A wise real estate investment will pay for itself on a monthly and annual basis, while paying the note. Your ultimate goal is to own property “free and clear,” which creates maximum cash flow.
2. Leverage.  You can own $150,000 worth of real estate with only 15-20% cash. You can borrow cash from one property to buy another. Your short-term goal is to use leverage to acquire a portfolio of real estate. Your long-term goal is to pay the loans off and own your properties “free and clear”
3. Debt Reducation.  Real estate is one of the few investments where someone else will make your payments. In essence, the tenant makes the payments and reduces your debt.
4. Tax Savings.  You are allowed to depreciate the house and write off your expenses in order to reduce your taxes*.
5. Appreciation.  Over time the value of houses and condos have risen. The average value of home has traditionally doubled in value every 15 years**.

*Consult your accountant or tax attorney to specifics related to the tax benefits of investing in real estate.

** The government Office of Federal Housing Enterprise and Oversight figures appreication rates for Metropolitan Statistical Areas around the county. Check this site to see what appreciation rates have been in your area.  Using their figures, the following data shows appreciation of a $100,000 home purchased in 1982:

1982 – $100,000
5 years – $135,800
10 years – $150,100
15 years – $196,000
20 years – $243,600
25 years – $316,700

I will talk more in the future on the college saving aspect.

 

Look Long Term When Buying a Home

I received an email earlier today from a colleague at Bob Parks Realty, LLC.  He gave an example of the long-term value of real estate that made a lot of sense.

In Middle Tennessee in the past 10 years, the average value of a 2000 square foot, 3-bedroom, 2-bath, 2-car garage home built in 1990 has appreciated as follows:

• 1997, $142,130
• 2002, $155,440
• 2004, $168,178
• 2006, $195,218
• 2007, $200,688
• 2008 (1st quarter), $198,300

You can see that from 2007 to 2008, home values on average depreciated about 1 percent, BUT in 10 years the home has gone up 41 percent.  Clearly, real estate when you look at the long term can be one of the best investments you can make.

In a related topic, this is the first time in more than 25 years that interest rates are at a historic low at the same time the supply of homes is up.  Typically if rates are low, inventory is also low and when rates are high, there are plenty of homes on the market. 

I believe we are at the bottom of curve for home values and we will see home prices coming back up in the near future.  If you’re sitting on the fence, in my opinion this is the perfect time to buy.

Using a Realtor When You Buy

You often hear that sellers should be very picky when choosing an agent to market a listing, but little advice is given to buyers on how to find a real estate professional.  In fact, most offices require their agents to work “floor time” or an “opportunity schedule” so that a licensed professional is always available if a customer calls looking for an agent.  This results in many clients simply letting their fingers do the walking to find someone who will help with one of the biggest financial decisions of their lives.

However, when you choose a Realtor to work with when you purchase a home, that agent needs to be just as professional, informed, and experienced as one you’d get to list your house.  My friend Kathy listed some questions on her site this week for buyers to ask Realtors when choosing who to work with.  There are some great questions to ask a buyers agent when you’re considering a home purchase.  For example,

• What percent of your business is by referral?
• What is the absorption rate of this market?
• Do you hold the ABR designation?
• Can I call your last buyers or sellers and ask their opinion of your work? Or ask to see copies of letters or thank you cards given to you from buyers or sellers.

I encourage you to read the entire post and I reiterate what Kathy said in that any knowledgeable real estate agent should be able to answer these questions intelligently.

Housing Market Coming Back

Like the rest of the nation, we saw a dip in Rutherford County’s housing market last year, but the feel among Realtors is that the market is coming back.  An article in today’s Daily News Journal, a daily newspaper based in Murfreesboro, confirms the perception of agents.

Across the nation, existing home prices have declined more than 10 percent, according to Standard and Poor’s/Case-Shiller Home Price Indices. The drop represents the steepest decline since the organization’s 1988 data.

However, prices are up in Rutherford County, according to Roberts.  Numbers from MTAR show the average sale price was $183,511 in February of this year compared to $180,564 in February 2007.

The national market is hinting at a recovery… our local market is already in one!

Win a Kroger Gift Card!

Here’s the latest backpage ad for American Lifestyle magazine that comes out in May.  What do you think?

Shopping for a home is more complicated than buying milk and bread.

Negotiating sales contracts, counter-offers, addendums, home inspection repairs, financing, and making sure there is a clear title to a home can be challenging.

Buying or selling your home doesn’t have to be complicated when your Realtor eliminates the surprises and potential pitfalls.

Call Butch or Kathy by May 15th to enter a drawing for a $50 Kroger shopping card. You get the milk and bread and we’ll help with the house shopping.

*Kathy and I have teamed up to present the American Lifestyle magazine to our clients.

Upside Down Neighbors

Your neighbors were great.  They moved two or three years ago into the house next door that’s nearly identical to your own. They kept the lawn  mowed, their dog didn’t bark too much, and they once loaned you a router to edge the new table you built.  However, you learned they had some financial troubles when their mortgage jumped about $400 a month.  Normally they could’ve handle the added expense, but gas prices also increased their monthly expenses by another $100 and grocery prices rose as well. 

Your neighbors lost their home to foreclosure.  The lender just wants enough money to pay off most of the loan regardless of what it’s worth.  The house could go for $150,000, but the bank sold it for $125,00 just to get rid of it.  When all is said and done, you lost your good neighbors.  But you also lost 16% in your home’s value.  After several years – if you stay in your home - the value will return.  However, if you plan to move soon, you won’t get as much for your house as you would’ve a year ago.

According to MSNBC, foreclosures definitely hurt the neighbors.

In a study of foreclosures in Chicago in the late 1990s, Georgia Tech associate professor Dan Immergluck found that each foreclosure on an urban block lowered property values by an average of nearly 1 percent, and about 1.4 percent in low-income neighborhoods.

The silver lining is that if you sell and move to a new house, you should be able to recover the value of the home you’re selling through the savings of the one you’ll buy.