April 1, 2019

10 Steps to Buying a Home [INFOGRAPHIC]

10 Steps to Buying a Home [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • If you are thinking of buying a home, you may not know where to start.
  • Here is a simple list of 10 steps that you will go through to purchase a home.
  • Make sure to ask your agent for details about each step and what else may be required in your area!
Posted in The Market
March 13, 2019

Betting on the New Big Player in Town, by Mike Flynn

 

It’s been weeks, or maybe months, and the big announcement you’ve been waiting for has finally come: “XYZ Company” is moving its headquarters to Greenacre. All the experts agree: it will be a “game-changer” for the area, creating new jobs, new commerce and the kind of demand for surrounding real estate that investors and speculators dream of. Time to pay the premium, put up that down payment and get in on the action? As with most questions asked of a lawyer, the answer is an unsatisfying maybe. But we won’t leave you hanging there. As many of you have inferred by now, the “XYZ Company” announcement is inspired by Amazon’s planned HQ2 in Long Island City, which unraveled with alarming speed after Amazon’s executives determined that the political climate was not as favorable as initially thought. We know that there are a lot of people out there who suffered losses as a result of speculative buying in the Long Island City area, and below is a simple (non-exhaustive) list of issues to look out for when deciding on an area to invest or speculate.

 

 

Betting on the New Big Player in Town:

 

Let’s start with the obvious (which was maybe not so obvious a few weeks ago), whenever it is rumored or even “officially” announced that a big new user of space is coming to town, it is tempting to buy around the target area as early on as possible, betting on there being big upside when other users come flocking to the area to supply housing for new employees, restaurants, and other goods and services needed by all the new workers and residents in the area. The problem with getting in early, is that unlike stocks, bonds or any other number of easily traded investment instruments, real estate is illiquid and comes with high transaction costs (brokers, attorneys, transfer taxes, etc.), and if the big deal expected to be the catalyst for demand craters, you will be left with an expensive piece of real estate that you will plan to either hold for an indeterminate amount of time, or sell for a short term loss. Neither is a good option, so make sure before you jump into an unknown market to speak with local real estate brokers who have worked in your target area through several economic and political cycles. Googling real estate deals in the area or perusing Loopnet may help you to graze the surface, but nothing will give you insight like speaking to a real estate professional who has been burned, or seen others burned, when local residents and politicians get up in arms about over-crowding, gentrification or changes in use for local property.

 

It’s also a good idea to study employment statistics, demographics, prices and historical returns for the area prior to the introduction of a big catalyst like a planned Amazon headquarters. If the cap rate or return that you would have expected to receive without the introduction of the catalyst justifies the price you are paying, that gives you some added assurance that prices and returns will likely revert back to those past levels once the shock of any bad news wears off.  Consider using free resources like the bureau of labor statistics or U.S. census bureau data to determine the historical employment rate and demographic patterns in the target area.

 

Zoning:

 

Unless you plan to invest in property that does not need to be changed or further developed in any way (e.g., a multi-family residential building that you plan to buy and continue to operate as a multi-family, hopefully at higher rents), it is critical that you have a strong understanding of local zoning laws, and what the odds are that variances can be obtained if needed. In this case, it is important to consult an experienced local architect who can explain the local zoning laws and what can and cannot be built without a variance. A variance is essentially a form of government permission to deviate from the normal zoning regulations, so while a good architect can probably tell you what you can build in line with current zoning regulations, they will be speculating a bit (hopefully based on past professional experience) as to whether a variance will be granted in your particular case. Get the best understanding of your odds of success and then get comfortable with the remaining uncertainty before deciding to forge ahead.

          

In New York City and many of the surrounding areas, local boards control, or have a big influence on the approval or denial of variances, so in addition to consulting an architect, you should once again tap experienced local real estate brokers and zoning attorneys to get an idea of the types of projects the local board in your area has historically favored or disfavored. Some areas of New York City have been dubbed “special districts”, and in these areas there may be added resistance to any plans to change the use or size of structures.

 

 

Legal Structure of Ownership and Thinking Outside of the Box:

 

Another big consideration is the existing or planned form of legal ownership for the property you are purchasing. By now, use of the term “think outside of the box” is so clichéd that most of us probably would have to strain to remember a time when it wasn't in use to describe creative thinking. However, in the world of real estate, it is an especially appropriate descriptor for how you should think about the “box” or “boxes” you are buying or developing on land or within a building, and how you can change the number and usage of each “box” to maximize profit.

 

Still with me? Consider this real life example: Client is seeking to invest in a brownstone in an area of New York City that has been appreciating in value over the past decade or so as it slowly became a hot area.*  The brownstone that they identify as a target acquisition is in need of repairs and is currently set up as a four family apartment building. The obvious play here is to buy the brownstone and seek to vacate each apartment as each lease expires or is able to be terminated, make capital improvements to each unit as it comes on line and re-rent each unit at now market rates. Once fully leased up, the client would have the choice of holding the brownstone and receiving the cash flow from rental income, or putting the fully leased brownstone on the market and sell it for a gain (a sophisticated “flip”, if you will).  What client opted to do is far more interesting. Client is still in the process of vacating each unit as quickly as possible and making capital improvements and needed repairs as each unit is ready, but instead of seeking to re-rent the units, client is in the process of converting the building to condominium ownership, so that each apartment can be sold separately. There are a few benefits to doing it this way:

·      As the condo sponsor you get to retain control of the project and roll out each unit while waiting for the others to be vacated and improved – this allows you to maximize the time value of the gain from each unit by selling the unit as quickly as it is ready, rather than waiting for all of the units to be ready for market.

·      As each unit is sold, the client also has the option of using the sale proceeds to help fund the completion of the other units. The project takes on a self-funding element that could be equated to a developer building a tract of houses in the suburbs in phases as earlier houses are sold off.

·      With a carefully worded offering plan, the sponsor also has the ability to hold on to, and rent out, some of the units.  This can serve as a hedge against unexpected stagnation in the apartment sales market because the sponsor can capture rental income for the unsold units while they weather market conditions.

·      If you have little interest in navigating the difficult business of being a landlord, it is a way to “flip” the building piece by piece, a minimize the amount of landlording you need to do on your way to capturing your short term gain.

 

Of course, before putting any money at risk on this kind of investment, it is important to do your diligence and make sure that the economics make sense. You will, once again, want to consult with a knowledgeable real estate broker to make sure that the separate sale of each apartment, after conversion costs, will net you more than the sale of the whole building, and you will need to discuss the costs, timeline and logistics of creating the condominium with a knowledgeable real estate attorney. To form a condo an offering plan and declaration need to be drafted, approved by the NYS Attorney General’s Office, and properly recorded and filed.

 

Hopefully this article serves as a good starting point when thinking about some of the risks and opportunities to consider before speculating on real estate.  No matter how much the world changes, there will always be opportunities to make and preserve fortunes in real estate, you just have to go into it with your eyes open and a good sense of the risks to be navigated, hopefully with competent professionals at your side!

 

 

*Footnote: Many readers will doubtless be wondering how does one recognize that an area is a “hot area” to invest in? Obviously no one has a crystal ball, so all we are all left with two choices when trying to deploy capital for an investment in an uncertain future: 1) look at the features of other areas that seem to have been responsible for appreciation in value (e.g., lot size, zoning use or mix, proximity to the city, proximity to public transportation, influx of trendy bars or restaurants, etc.), or 2) wait until prices in an area are obviously trending upwards and, instead of trying to get in on the ground floor, invest on the way up and hold until it’s obvious that the trend has reversed. It’s counterintuitive to wait until an area is getting expensive before buying – after all, we humans love feeling like we got something at a bargain price – but real estate cycles tend to be a lot longer lived than bull and bear cycles in other, more liquid, asset classes, so you may find it makes sense to take advantage of an area that is obviously trending upward, rather than trying to find the “next hot area.”

Posted in Birds Eye View
Nov. 6, 2018

5 Tips When Buying a Newly Constructed Home

5 Tips When Buying a Newly Constructed Home | Keeping Current Matters

The lack of existing inventory for sale has forced many homebuyers to begin looking at new construction. When you buy a newly constructed home instead of an existing home, there are many extra steps that must take place.

To ensure a hassle-free process, here are 5 tips to keep in mind if you are considering new construction:

1. Hire an Inspector

Despite the fact that builders must comply with town and city regulations, a home inspector will have your best interests in mind! When buying new construction, you will have between 1-3 inspections, depending on your preference (the foundation inspection, the pre-drywall inspection, and a final inspection).

These inspections are important because the inspector will often notice something that the builder missed. If possible, attend the inspection so that you can ask questions about your new home and make sure the builder fixes any problems found by the inspector.

2. Maintain good communication with your builder

Starting with the pre-construction meeting (where you will go over all the details of your home with your project manager), establish a line of communication. For example, will the builder email you every Friday with progress updates? If you are an out-of-state buyer, will you receive weekly pictures of the progress via email? Can you call the builder and if so, how often? How often can you visit the site?

3. Look for builder’s incentives

The good thing about buying a new home is that you can add the countertop you need, the mudroom you want, or an extra porch off the back of your home! However, there is always a price for such additions, and they add up quickly!

Some builders offer incentives that can help reduce the amount you spend on your home. Do your homework and see what sort of incentives the builders in your area are offering.

4. Schedule extra time into the process

There are many things that can impact the progress on your home. One of these things is the weather, especially if you are building in the fall and winter. Rain can delay the pouring of a foundation as well as other necessary steps at the beginning of construction, while snow can freeze pipes and slow your timeline.

Most builders already have a one-to-two-week buffer added into their timelines, but if you are also in the process of selling your current home, you must keep that in mind! Nobody wants to be between homes for a couple of weeks.

5. Visit the site often

As we mentioned earlier, be sure to schedule time with your project manager at least once a week to see the progress on your home. It’s easy for someone who is not there all the time to notice little details that the builder may have forgotten or overlooked. Additionally, don’t forget to take pictures! You might need them later to see exactly where that pipe is or where those electrical connections are once they’re covered up with drywall!

Bottom Line

Watching your home come to life is a wonderful experience that can sometimes come with hassles. To avoid some of these headaches, keep these tips in mind!

The Flynn Team has in-depth knowledge about buying or planning a newly constructed home in and around Long Island. Give us a call! (516) 294 7292.

 

Posted in Homebuyers
Sept. 25, 2018

Where Are Mortgage Interest Rates Headed In 2019?

Where Are Mortgage Interest Rates Headed In 2019? | Keeping Current Matters

The interest rate you pay on your home mortgage has a direct impact on your monthly payment; the higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.

Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily over the course of the next year.

Where Are Mortgage Interest Rates Headed In 2019? | Keeping Current Matters

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

According to CoreLogic’s latest Home Price Index, national home prices have appreciated 6.2% from this time last year and are predicted to be 5.1% higher next year.

If both the predictions of home price and interest rate increases become a reality, families would wind up paying considerably more for their next homes.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth, so don’t wait until next year! Meet with a local real estate professional to evaluate your ability to purchase your dream home now.

Posted in The Market
Aug. 7, 2018

5 Reasons to Hire a Real Estate Professional Before Entering the Market!

5 Reasons to Hire a Real Estate Professional Before Entering the Market! | Keeping Current Matters

Whether you are buying or selling a home, it can be quite the adventure. In this world of instant gratification and internet searches, many sellers think that they can ‘For Sale by Owner’ or ‘FSBO,’ but it’s not as easy as it may seem. That’s why you need an experienced real estate professional to guide you on the path to achieving your ultimate goal!

The 5 reasons you need a real estate professional in your corner haven’t changed but have rather been strengthened by the projections of higher mortgage interest rates and home prices as the market continues to pick up steam.

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. So you found your dream house, now what?

There are over 230 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to ensure you achieve your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyers (who want the best deals possible), to the home inspection companies, all the way to the appraisers, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start in order to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you its true value. According to a recent article by the National Association of Realtors, FSBOs achieve prices significantly lower than the prices of similar properties sold by real estate agents:

FSBOs earn an average of $60,000 to $90,000 less on the sale of their home than sellers who work with a real estate agent.”

Get the most out of your transaction by hiring a professional!

5. Do you know what’s really going on in the market?

There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

You wouldn’t replace the engine in your car without a trusted mechanic, so why would you make one of the most important financial decisions of your life without hiring a real estate professional?

Posted in The Market
June 7, 2018

Did Tax Reform Kill the Luxury Market? NOT SO FAR!

Did Tax Reform Kill the Luxury Market? NOT SO FAR! | Keeping Current Matters

The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000. When the tax reform legislation was put into law at the beginning of the year, some experts felt that it could have a negative impact on the luxury housing market.

Capital Economics:

“The impact on expensive homes could be detrimental, with a limit on the MID raising taxes for those that itemize.”

Mark Zandi of Moody’s Analytics:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

The National Association of Realtors (NAR) predicted price declines in “high cost, higher tax areas” because of the tax changes. They forecasted a depreciation of 6.2% in New Jersey and 4.8% in Washington D.C. and New York.

What has actually happened?

Here are a few metrics to consider before we write-off the luxury market:

1. According to NAR’s latest Existing Home Sales Report, here is the percent change in sales from last year:

  • Homes sales between $500,000 – $750,000 are up 11.9%
  • Homes sales between $750,000 – $1M are up 16.8%
  • Homes sales over $1,000,000 are up 26.7%

2. In a report from Trulia, it was revealed that searches for “premium” homes as a percentage of all searches increased from 38.4% in the fourth quarter of 2017 to 41.4% in the first quarter of 2018.

3. According to an article from Bloomberg:

“Median home values nationally rose 8 percent in March compared with a year earlier, while neighborhoods of San Francisco and San Jose, California, have increased more than 25 percent.

Prices in affluent areas in Delaware and New York, such as the Hamptons, also surged more than 20 percent.”

Bottom Line

Aaron Terrazas, Zillow’s Senior Economist, probably summed up real estate’s luxury market the best:

“We are seeing the opposite of what was expected. We have certainly not seen the doomsday predictions play out.”

Contact The Flynn Team for questions about the new tax implications in your area.

Posted in The Market
May 30, 2018

Millennials Are Skipping Starter Homes for Their Dream Homes

Millennials Are Skipping Starter Homes for Their Dream Homes | Keeping Current Matters

A new trend has begun to emerge. With home prices skyrocketing in the starter home category, many first-time homebuyers are skipping the traditional starter homes and moving right into their dream homes.

What’s a Starter Home?

According to the National Association of Realtors (NAR), simply put, a starter home is a one or two-bedroom home (sometimes even a small, three bedroom).Prices vary widely by market but starters on average cost $150,000 to $250,000 while trade-up and premium homes cost upwards of $300,000.”

Finding Their Forever Homes Now

A recent CNBC article revealed that there are many factors that delayed older millennials (ages 25-35) from buying a home earlier in their lives. The aftereffects of the Great Recession teaming up with larger education costs forced many to either remain living in their parent’s homes or to rent.

With the economy continuing to improve, many millennials have been able to break into better-paying jobs which has helped spur down payment savings. As the dream of homeownership comes closer to reality, many millennials are saving for their forever homes.

According to the latest statistics from NAR, 30% of millennials bought homes for $300,000 or more this year (up from 14% in 2013). Diane Swonk, Chief Economist at Grant Thornton weighed in saying, “They rented for longer. Now they’re going to where they want to stay.”

More and more millennials are settling down, getting married, and starting families, which is a huge factor driving them to look for larger homes.

Increased competition in the starter home market has also been a driving force in waiting to afford their dream homes. Inventory in the starter home market is down 14.2% from last year, according to research from Trulia. This has driven prices up and has led to bidding wars.

Many first-time buyers who were originally looking for starter homes are realizing that for just a little bit more of an investment, they could afford trade-up or premium homes instead.

Bottom Line

If you plan on purchasing your first home this year, work with a local professional who can help you determine how much house you can afford. You may be pleasantly surprised.

Posted in Lifestyles
May 18, 2018

Is Your First Home Within Your Grasp Now? [INFOGRAPHIC]

Is Your First Home Within Your Grasp Now? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • According to the US Census Bureau, ‘millennials’ are defined as 18-36-year-olds.
  • According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 32.
  • More and more ‘old millennials’ (25-36) are realizing that homeownership is within their grasp now!
Posted in Homebuyers
May 2, 2018

This Just In: Data Says May is the Best Month to Sell Your Home

This Just In: Data Says May is the Best Month to Sell Your Home | Keeping Current Matters

According to a newly released study by ATTOM Data Solutions, selling your home in the month of May will net you an average of 5.9% above estimated market value for your home.

For the study, ATTOM performed an “analysis of 14.7 million home sales from 2011 to 2017” and found the average seller premium achieved for each month of the year. Below is a breakdown by month:

This Just In: Data Says May is the Best Month to Sell Your Home | Keeping Current Matters

ATTOM even went a step further and broke their results down by day.

Top 5 Days to Sell:

  • June 28th – 9.1% above market
  • February 15th – 9.0% above market
  • May 31st – 8.3% above market
  • May 29th – 8.2% above market
  • June 21st – 8.1% above market

It should come as no surprise that May and June dominate as the top months to sell and that 4 of the top 5 days to sell fall in those two months. The second quarter of the year (April, May, June) is referred to as the Spring Buyers Season, when competition is fierce to find a dream home, which often leads to bidding wars.

One caveat to mention though, is that when broken down by metro, ATTOM noticed that while warmer climates share in the overall trend, it turns out that they have different top months for sales. The best month to get the highest price in Miami, FL, for instance, was January, and Phoenix, AZ came in with November leading the charge.

If you’re thinking of selling your home this year, the time to list is NOW! According to the National Association of Realtors, homes sold in an average of just 30 days last month! If you list now, you’ll have a really good chance to sell in May or June, setting yourself up for getting the best price!

Bottom Line

Contact a local real estate professional who can show you the market conditions in your area and get the most exposure to the buyers who are ready and willing to buy!

Posted in The Market
April 24, 2018

How Much Do You Need to Make to Buy a Home in Your State?

How Much Do You Need to Make to Buy a Home in Your State? | Keeping Current Matters

It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C.

States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required.

Below is a map with the full results of the study:

How Much Do You Need to Make to Buy a Home in Your State? | Keeping Current Matters

GoBankingRates gave this advice to anyone considering a home purchase,

“Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”

As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!

Bottom Line

If you are considering buying a home, whether it’s your first time or your fifth time, consult The Flynn Team, we can help evaluate your ability to do so in today’s market!

Posted in The Market