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Still Have Questions?
FAQ
Can you help me buy a house?
Yes. Our team has more than 40 (+) years buying property. In fact, we have personally bought and sold more than 250 single family homes so we have mastered the art of buying a home and would love to help you through the process. See our step by step guide to buying a home
Can you help me buy/sell an investment property?
Yes. Our team has more than 40 (+) years buying property. In fact, we have personally bought and sold more than 250 single family homes so we have mastered the art of buying a home and would love to help you through the process. We have also bought and sold 5 apartment complexes totally approximately another 200 units. We currently own and operate our own portfolio of single family homes and two multi-family properties so we thoroughly understand the management process as well which will be instrumental in the sale of your investment property. We even subscribe to all of the same software and listing services that other commercial real estate brokers and real estate agents subscribe to and we do this to ensure you are making the best possible decisions.
Can you help me sell a house?
Yes. Our team has more than 40 (+) years selling property. In fact, we have personally bought and sold more than 250 single family homes so we have mastered the art of selling a home and would love to help you through the process. See our step by step guide to selling a home
Is investment property right for you right now?
Investment properties can be very lucrative if they are well managed, but not everyone is in a position to do that well, and there are a lot of factors to look at in this checklist.
Can you cover the debt service?
A rental produces income, but usually is purchased with financing. Obviously cash is king in any real estate transaction and has more leverage to influence terms, but most investors leverage their cash. Can you cover the mortgage between tenants or for other unforeseen vacancies that reduce gross income? You may need to consider building a reserve account for items like this.
How are you paying for this initially?
Do you have the capital to fund the deal? Are you financing it? Do you have the funds for the down payment AND a reserve for construction and carry costs?
Are you comfortable and happy being a landlord?
The first and most honest question you have to ask yourself is do you enjoy being a landlord? If yes, do you have the soft skills and experience to place and manage tenants? If not, you may need to consider the cost of hiring professional management into your expenses.
What is a 1031 exchange and how can I utilize it?
A wealth building tool called the 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
What is a self directed IRA and can I really use money in my existing IRA, self direct them and buy real estate?
A self-directed individual retirement account (SDIRA) is a type of individual retirement account (IRA) that can hold a variety of alternative investments such as real property from regular IRAs. Although the account is administered by a custodian or trustee, it’s directly managed by the account holder, which is why it’s called self-directed. These can be either Traditional or ROTH IRA’s. Since you are the account holder, you can direct those funds into the acquisition of real estate.
Can you help me provide a tenant for my rental property?
Yes we can. We have been helping landlords provide tenants for more than three decades. We have learned the ins and outs of this thought process and we have many recommendations. See our aditional services.
Are you able to help me with an eviction if I own a property and have a tenant living there?
We own many rental properties ourselves and we have a great team of legal staff that will guide you through this process. This particular legal team has a ton of experience and we would be more than happy to give you a formal introduction.
Other Useful Defintions
CAP (Capitalization Rate): Percent of cash return in the first year if the property were purchased for cash. The ratio of NOI to purchase price.
NOI (Net Operating Income): Income after vacancy and expenses and before debt service.
Rent Ratio: (monthly rent / purchase price or market value). Should be 1.0% or more for acceptable cash on cash return with 75-80% loan. Mostly used for rental homes.
Gross Rent Multiplier: (purchase price or asking price / gross rents received from an investment). Mostly used for multifamily (apartment) properties.
Depreciation: Commercial is 39 years linear depreciation, residential (to include multifamily) is 27.5 years. This assumes all physical assets will predictably depreciate to a value of zero after this time, and the losses from this offset income on a tax basis. Depreciation is one of the main benefits of investment real estate ownership.
Cash on Cash Return: Percent of cash out of an investment in a year relative to the amount of cash invested. It does not consider time value of money. It is a very commonly used metric however, seldom used professionally.
Internal Rate of Return (IRR): The annual rate of return that one receives on an investment for all of the capital and cash flows based on the net present value for each when deployed. It is the discount rate such that the sum of today’s investment and future cash flows have a net value of zero. It expresses in the form of an interest rate the value of a given investment in today’s terms. It is the most accurate and one of the most widely used ways of calculating and comparing multiple investments by professionals.
Cash flow vs appreciation: Lower risk deals tend to have more stabilized values but produce cash flow over long terms that help meet investor cash flow goals. Appreciation and value add deals can generate a large profit but take on more risk to attempt those objectives.
Self Directed IRA – an individual retirement account that allows you to save for retirement with assets that are off-limits for conventional IRAs, including precious metals, real estate assets and cryptocurrencies.
Inspection Period – Sometimes called “due diligence” this is the period of time agreed upon in an executed sales contract the buyer has to inspect the property for defects that may affect the value. For a buyer, the longer the inspection period, the better. For a seller, the shorter the inspection period, the better.
Request to Remedy – the request the buyer makes to the seller for unsatisfactory conditions found in the inspection. Sometimes this could be a reduction in price of the sales contract but more often it is a request for improvements and reinspection of the repaired defects.
Earnest Money – sometimes called consideration, it is the money paid to confirm a contract. Held in escrow by a 3rd party it shows good faith the seller intends to perform on the sale.
Financing Contingency – is a clause in a sales contract that agrees to allow the buyer to secure financing in a specified period of time. The risk is the buyer may not obtain a loan and the sale does not proceed. However all cash sales limit the pool of buyers.
Mortgage payoff – the balance of the loan to pay it in full at that particular time. Some mortgage loans have and early payment penalty when paid off early.
Comparable sales – Recent sales of similar properties in nearby areas and used to help determine the market value of a property.
Title company – a third party that is hired to ensure that a home’s title is clean with no encumbrances. They provide research and insure the title to the home a buyer is purchasing, and usually manage the closing. We at List Premier have two Title Companies that we recommend depending on whether it is residential or commercial.
Down payment – the sum of money initially paid for for a larger transaction that was paid for with financing.
Pre-approval letter – a document from a lender that has agreed, in principle, to lend you an amount of money towards the purchase of your home but hasn’t proceeded to underwriting for a final approval.
Loan commitment – a declaration to a borrower by a lending institution that it will loan a specific amount at a certain interest rate on a particular piece of real estate, usually for a specified period of time.
Attorney Approval Clause – enables buyers to sign a sales and purchase agreement with the transaction while consulting with an attorney. The clause dictates that fulfillment of the deal will not take place until it is approved by the attorney.
Home Warranty – a contract between a homeowner and a company that provides discounted repair and replacement service on a home’s major components, such as the furnace, HVAC, plumbing, and electrical systems and may also cover major appliances.
Title Insurance – Title insurance protects both lenders and homebuyers against loss or damage occurring from liens, encumbrances, or defects in a property’s title or actual ownership. Common claims filed against a title are back taxes, liens, and conflicting wills. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences
Property Insurance – sometimes called “homeowners insurance” and usually with a sizable deductible, it provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft.
Buyers Market – a period of time in a particular market where there is a surplus of houses or properties and buyers can have a competitive advantage in price negotiations.
Sellers Market – a period of time in a particular market where there is a surplus of prospective buyers with a shortage of houses or property on the market and sellers can have a competitive advantage in price negotiations.
Market Appreciation – increase in the price or value of an asset which occurs when the market value of an asset is higher than the price paid for an asset.
Forced Appreciation – occurs when a real estate investor proactively increases the value of an investment property. An investor can force appreciation by increasing rental income, increasing property value, or a combination of both.
1031 Exchange – pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Treasury Regulations in order to defer Federal, and in most cases state, capital gain and depreciation recapture taxes with the sale or disposition of real estate and the acquisition of like-kind real estate or personal property
Real Estate Agent – a licensed professional who works on for the buyer or seller of real estate during a sales transaction A, working on behalf of a licensed real estate broker.
Real Estate Broker – a person who is authorized by a state to act as an agent for the sale of land or property, they can be their own agent, but most of the time have agents working under their license.