Don’t Trust Your Realtor: Common Valuation Mistakes

OK OK… I don't really mean to not trust your Realtor or other advisors, unless they give you really bad advice, like the three mistakes outlined in this article. Many Realtors understand how to value real estate and can be a great asset (especially the ones that focus on real estate investors), but the unfortunate truth is that many investors and agents make these common mistakes:

· Add value to a property for a bedroom

· Incorrectly adjusting for square footage

· Compare non similar style homes with no adjustment

Add value to a property for a bedroom

This is by far the most common error that I see. In some cases a bedroom will add value but normally you cannot count on it. If a house has more bedrooms it is likely bigger and the large home is more valuable, but the bedroom itself is not adding the value, the square footage is. If two houses are the same size and one has an additional bedroom it is lacking something else OR has much smaller rooms, which will deter some buyers. It is basically a wash for valuation purposes. The one exception to this is if the house does not conform to the neighborhood. For example, if the entire neighborhood is two or three bedrooms and you have a one bedroom, it actually should add value to add a bedroom, even if you are keeping the house the same size. I would be very careful in these rare cases because it is hard to know how much value a bedroom will actually add. So when you are looking at your comps, look at the size and not the number of bedrooms.

This does not hold true for bathrooms. Bathrooms will almost always add value.

Incorrectly adjust for square footage

A less common, but more devastating error that I see is to use a price per square foot model to value a home. Many agents make this mistake. The error is to use an average price per square foot and multiply that number by the size of the house you are trying to value. It is not wise to use this method, especially if your house is on the small or large size for an area. Think about it. Is a 2,000 square foot house really worth twice as much as a 1,000 square foot house that might be next door? The area brings a certain range of values that all houses fall in and the lot values should be close to identical no matter what size house is on it. Using a price per sq foot model does not account for the lot.

It is true that you need to adjust for size, because larger homes carry more value, but it is easy to mess the adjustment up. The best way to do this is to dig into your comps and get an idea for the required adjustment. This can be very tricky because the value per square foot decreases as the homes get larger. It is a safe bet to never buy the largest or smallest house in an area, but if you do, use a very conservative adjustment for size. One rule of thumb that I like to use is 1/3rd of the average price per square foot as the size adjustment. This is pretty close to average, so it is nice; but again is a rule of thumb and is not science.

Keep in mind that the adjustments that I mentioned are above the ground adjustments. Basements do NOT carry the same value. In fact, it is normally worth less than half of the above ground square footage. For example, in a nice area an above ground adjustment might be $90.00 above ground but basements in that area might only be worth an adjustment of $30.00 per finished sq foot. I never have understood this because if finished it is usable/livable space and people love basements. I gave up trying to understand why the basement has little value and have just accepted it. You don't need to understand why it is true as long as you know it is true and use that to help come up with an accurate value.

Compare non similar style homes with no adjustment

This one makes me laugh when I hear it. The biggie that I see here is comparing the ranch or rambler style home to a home with stairs, like a bi-level or 2-story. The house with no stairs is always more valuable. You need to think of yourself as the buyer and what a buyer would want. Another common example of this mistake is comparing older homes to newer homes. In fact, we just took a call today from a client that was comparing her home to a never been lived in house one neighborhood over. They were almost identical in size and were within a quarter of a mile to each other, but one is about 30 years old and one was just built. Do you really think that someone would buy a used home for the same price they can get a new home for? The newer home is worth more, so it is best to not even use that comp; but if you need to use it, be sure to adjust for the age.

My hope is that by understanding these common mistakes you will be able to come up with more accurate after repaired values, and be a better investor for it.

Season to Get Out of Real Estate

Talk about beautiful timing.

Even today, a decade after the facts of the case, the leveraged buyout of Equity Office Property Trust remains one of the largest of all time: $36 billion for practically 600 office constructs in New York, Washington D.C. and dozens of the nation's largest cities.

But in late 2006, some wondered if the billionaire who exchanged the REIT was being a little rash. After all, the real estate upturn was in full swing, and the S& P 500 was primary to smack brand-new all-time highs. “Is he cashing out too early? ” questioned a Bloomberg headline when the transaction was announced.

We all know the answer, of course.

Billionaire Sam Zell deftly circumvented the coming real estate carnage. Then, with tolls at generational lows a few years later, Zell bought hundreds of apartment complexes at dirt-cheap prices.

And today? Well, that's the foreboding part…

Once again, Zell is exchanging his real estate maintains. Last-place drop, he emptied a one-fourth of his portfolio, constructs totaling about 23,000 rental accommodations, to Starwood Capital Group for more than$ five billion.

Zell next sold off apartment buildings in South Florida and Denver, with complexes in Phoenix, Boston and other metro areas expected to be sold before its first year is out.

“No one has ever accused me of not being a realist, ” Zell told CNBC's talking heads recently.

Reality Bites

Few things are more real than the hazards of rising interest rates. Related about the Fed's late-to-the-party menaces and distorted asset groceries drunk on years of zero-interest-rate plan, Zell is coming out while the getting is still good.

In the past few months, new-home sales hit their highest level in eight years. Pending dwelling auctions rose by the largest percentage gain in a decade.

Even home snapping is back in style again. RealtyTrac, setting 2015 data, approximated a 75% increase in active dwelling flippers – the highest since 2007.

Nationally, the average gross profit on a flipped dwelling was $55,000 – the largest since 2006.

But for the realists like Zell, the widening rifts in the facade are plain to see.

For instance, accommodation tariff is starting to come down in New York and San Francisco – two of the hottest sells in the country. There is simply too much supplying and not sufficient demand.

A few weeks ago, the head of the Federal reserve bank of Boston urged about overheated supposition in the commercial real estate marketplace. “We are of interest to potentially exaggerated commercial real estate prices, ” said the bank's president, Eric Rosengren, “because they might risk a bout of monetary instability.”

Translated from “Fedspeak, ” Rosengren was saying: Get out now .

Even those ultra ultraluxury homes in the $100 million and up wander aren't selling. It's a rarefied market, for certain, but The New York Times recently noted that a record 27 owneds, each with a nine-figure price tag, are yearning unsold on world markets. According to digits kept by Christie's International Real Estate, 19 such dwellings were on the market in 2015 and 12 in 2014.

Late last year, I wrote about one of those massive palazzos here in Florida – the beachside $159 million, 60,000 square paw Le Palais Royal. It's still for sale.

Perhaps the additional amber leaf they coated on the front protection door will help.

Beware the Peak

I can't see Sam Zell taking up residency in Le Palais Royal. But then again, he exchanged its term of office owneds in 2006, and watched world markets rift wide open a year later. Now he's off-load his real estate portfolio again, so, who knows?

If history echoes, Zell exactly might find his next immense distressed real estate negotiations in the sumptuous dwellings of the( once) superrich – amazing pearls of the “new” gilded age now past its prime.

How To Stay Motivated As a Real Estate Investor

So you've finally decided to pursue your life-long heat of becoming a real estate investor! More importantly, you've educated yourself on various speculation programmes( to include exit plans ). Although you love what the hell are you do, you find it quite challenging to stay motivated on a day-to-day locates. On some dates you even ask yourself rather or not you've made the right decision. Yet the tempt of lucrative passive income has propelled you to take the risk.

Most if not all successful real estate business owners share similar battles. Nonetheless, to stay driven and reduce risk, rehearsal the following tips-off starting today 😛 TAGEND

1. Have clearly defined investment goals upfront: visualize it, do it and be it!

2. Move a directory of your “whys”. Your index should evoke some affections. In other utterances, write off the reasons why you want to achieve your listing of points. Your list of “whys” will prevent you caused and unafraid of reaching your investment points. Your “whys” will likewise help you overcome the snags that may stand in your way.

3. Knowledge. Know and understand the latest procedures and financing strategies. Knowledge prevents mistakes and mitigates peril. It will likewise give you the confidence to be able to influence others.

4. Kick the Tires. Evaluate real estate deals possession spates by talking to intermediaries and other investors. Amply immerse yourself by learning while doing!

5. Always be grateful. Practising grateful and spending some time reflecting on the things you are thankful for gives you a much better perspective and mindset.

6. Focus on the long-term programme. Center on your long-term aims when you're feeling unmotivated. Having questions mustering lease from tenants? Exactly got hit with major restores for one of your qualities? Expenses and difficulties will happen now and again. Assess the situation, affix/ resolve conflicts and move forward with your business.

7. Strategy for how you will deal with a lack of drive. Temporary disappointments are bound to happen. You're only human. Think of what others in more untoward situations have permitted. Yet ultimately they have reached their goals, Use them as an example will push you through your most trying times.

Lastly, abide positive! Be positive and surround yourself around positive beings. Positive energy will face-lift you up and increase your motivation and productivity. Being positive will likewise help you deal with the various changes in your business. This in turn will enable you administer the pressures that come with the real estate investing industry.

Off-Market Belongings: The Key to Real Estate Success

It was the “Wild-West” periods of real estate! The grocery has only just been cratered, real estate agents were declining like controls, and the implosion of “liar-loans” was ravaging vicinities. Inspecting back, I sure picked one heck of a time to start!

When you begin in and survive a market like this, buying assets at the highest price grows permanently embossed on your being. It is similar to how many people who was strong enough to survive the Great Depression would ever deter an overstocked pantry.

So even though I have been a full-time real estate investor for seven years and world markets is prosper, I still diligently seek out possibilities that will be financially sound in any market. In other oaths, I merely buy really good deals!

The key driver of my real estate success has been OFF-MARKET qualities . Using proven arrangements, I have consistently made extraordinary opportunities often on belongings I never would have known is furthermore potentially available!

So let's look at three beginnings for off-market properties.

The first is labouring immediately with homeowners. This is generally my preferred solution and this is where I concentrate my sell machine. It takes a little more struggle but this is where you find those “once in a lifetime” bargains. If you have a great arrangement, you will find exceptional opportunities routinely.

The second is working with high-quality Wholesalers and Wholesale Brokerages. Now you have an part group of beings rubbing the field go looking for well-priced investor agreements. Generally, they are aware of exactly what investors are looking for, how to estimate amends, and what premium overseas investors would pay for the asset. So in addition to your own produce contemporary attempts, you have an opportunity to capitalize on the efforts of 10 or 20 other people as well.

Lastly, as counter-intuitive as it may seem, real estate agents can be a great generator for off-market dimensions. You will often hear these owneds referred to as “Pocket Listings.” A owned where the representative knows the owner has an interest in selling, but for whatever rationale promotes the dimension not be rolled “on the open market” hitherto. This is very common with commercial real estate. If you want to learn about these opportunities before they punch world markets, you will definitely need to have developed a strong relationship with the agent.

Off-market qualities have incredible potential and has truly intensify your real estate endowing success. They are going to take a little more attempt but the payoff is obviously worth noting. In today's highly competitive asset market, there is a tremendous advantage in being able to talk to potential dealers firstly!

Automated Real Estate Software – The New Trend in Investing

The value of real estate has appreciated in the last few years. It too presents great potential for proliferation. Hence , now might be the best time to look at an investment in property. However, if you've spoken to someone who already has his knees deep in real estate investing, you will realize that a good deal of things are easier said than done.

It necessary skill and knowledge to rub world markets for high value properties.

Then comes territory good buyers.

Finally, there's a humongous amount of article work to handle.

This is where real estate investing software might lend a hand. They automate the entire process of real estate investing. If you would like to know more about such applications, here's a low-spirited down on some of the common pieces they offer.

Lead generation –

At the sound of a single button you are able to find an exhaustive list of buyers and sellers scattered in different regions of the country. The datum elicited includes reputations and forward address of buyers, owners of dimensions, the type of quality( bank owned, foreclosed, low-pitched and high-pitched equity, absentee proprietor etc .) and extent of currency paid.

Website invention –

Every business needs a website, specially if you do not have a physical orientation from which operate. Not all of us know the technicalities of writing HTML systems and designing an internet site. The real estate softwares can assist you start targeted and user-friendly websites that you can use to showcase your business.

Direct mail generator –

Marketing is the person of a real estate business. The more you structure the more guides you are able to engender. The direct mail generator aspect is contributing to setup a highly productive and efficient mail structure. You can send out emails, newsletters, postings and flyers.

There are a range of pre-made email templates you can use to send out sends to your contributes. Autoresponders make sure you can keep in touch with dealers and customers even when you are not physically present to answer their queries.

This feature is a highlight peculiarity of most real estate software given that the savings in time and money are large.

Investing gratuities –

This is a section that most newbies can benefit from. Most lotions include available resources library with info on the basic aspects of the sell. An open society of members can also give you an opportunity to interact and construct your asset with real-time knowledge about conclude, structure and closing a deal.

Diverse user locate –

Modern-day automated real estate investing software applications cater to a varied group of investors. It includes those who buy, choose and flip-flop owneds. If you are a landlord, it can increase the amenity of managing your dimensions including acquiring renters and restoring and rebuilding properties between subsequent bargains. There are also peculiarity that rehabbers and makes of new constructions can use.

Contracts and paperwork –

Real estate investment too conveys a great deal of paperwork. Most applications offer tools to produce contracts. Features such as auto-fill enable you to pack personal details into letters, contracts and other property-related documents. You can ratify them online, and then email or fax them free of charge.

There is one thing – you need to be realistic. Real property softwares are tools you can use to streamline your business. You should have a real estate business to start with and some basic know-how on investing.