"I always voted at my party's call, and I never thought of thinking for myself at all."William Gilbert
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Realtors who offer quality real estate services in California.
Realtors... you can often come across this word whenever you intended to buy or sell a real estate property or any activity connected with it. The same thing happened to me when I wanted to purchase a land in Santa Cruz. I do my business in Santa Cruz for ...
Real Estate Flipping Investments
Two people, so a saying goes, can look at one thing and see two different things. In the world of real estate, there are only two people involved in the process, the buyer and the seller. Whoever gets the most benefits, nobody can tell. But whether it's ...
Real Estate Investors - Red Alert
Real Estate Investors - Red AlertHow's the real estate marketing doing? Is the huge jump in home prices that is evident in some areas symptoms of a value bubble? Good questions, yes?Two things to keep in mind when surveying the market: 1. All real estate ...
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Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties, purchased income properties out of state. California investors bought houses in Florida, Texas, and Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many of these investors made millions of dollars because of the appreciation in hot markets.
On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made a meager profit because they failed to do their homework on the out-of-state area's real estate market and customs.
If you 're thinking about buying investment properties in a different state than you're accustomed to, beware of these five surprises.
Surprise # 1 - 'These (extra) costs are the norm in this state!'
Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in Florida than in California. On the other side of the country, out-of-state investors were shocked by California's state tax held in escrow: 3.8% of the property's SALES price, no matter the actual profit made. In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit held until the next year's income tax filing.
Surprise # 2 - 'You can't lease this property!'
New home developers and many Homeowners' Associations (HOA)s prohibit property owners from leasing their properties. Some of these restrictions got passed, without the investor being notified, during the property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property. Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to occupy the home as a primary or secondary residence. Surprise # 3 - 'This house will only rent for $750 per month, not $1200!'
This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state properties to local investors, inflated the rental income. Because so many houses were purchased in a limited area by investors, a rental glut lowered the expected income. This created hardships for investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.
Surprise # 4 - 'You can't sell this house, now!'
Some investors who couldn't rent the out-of-state property decided to sell because the values did rise significantly while the house was built or during the purchase time. However, many investors were stunned when they were told they couldn't sell the property within the first year after purchase. Restrictions prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly popular with some developers.
Surprise # 5 - 'Houses don't appreciate 30% per year here!'
Perhaps you've attended or been invited to a high-power investment seminar that promotes out-of-state real estate investing. Some of these 'investor clubs' really are promoters who receive kick-backs in real estate commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant appreciation--year after year.
Don't make the costly mistake of not fully researching the complete market customs and restrictions in the area where you're thinking about investing. If you can't afford to go check out the area in person, choose another area that you can visit. Copyright © 2006 Jeanette J. Fisher
About the author:
Jeanette Fisher offers FREE "How to Start Real Estate Investing Teleseminar," free ebook, "The Truth about Making Money Flipping Houses" http://doghousetodollhouse .com
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