How Should You Approach Real Estate Investing?

Real estate investing isn’t for everyone. However, it can help you build incredible wealth if you have patience.

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I’m asked by clients on almost a weekly basis about real estate investing. The questions usually boil down to, “Does buying an investment property make sense for me?”

As you may know, I invest in real estate myself and am a huge proponent of owning property. Whether it makes sense for you or not as someone who isn’t in the real estate business depends on your goal.

When buying real estate as an investment, you have to realize that you are buying a business and need to treat it as such. What are the costs involved? What will your return be? Can you get a better return by investing your money in some other way? These are all questions to consider.

Real estate is a great long-term play.

One positive that real estate investing has is the ability to use leverage. If you put $100,000 toward a piece of property, you can own an asset worth $500,000. The tax advantages are numerous as well. You can write off capital gains, property taxes, and private mortgage insurance. Properties also tend to double in value every 20 years or so.

An investment property needs to meet the standards of the area you are buying in, not your personal standards. It’s important to do your due diligence up front when it comes to anything that is wrong with the home. The same goes for finding tenants. You need to look closely for any red flags. You can hire a property management company to handle all of this if you choose.

I look at real estate investing as a great long-term play that is as close to a safe bet as you can get. Most people regret not investing in real estate sooner once they start seeing those big returns down the line.

If you have any questions for us or want to know more about investing in real estate, give me a call or send me an email. I look forward to hearing from you soon.

What’s So Important About Home Appraisals?

If you’re buying a home and getting a loan, appraisals are something you need to know about

Selling in the Houston area? Get a market analysis report

Purchasing in the Houston area? Get full MLS access

Today I want to go over the subject of home appraisals and what you need to know about them. First though, I want to thank you for helping our team get recognized as one of the top-20 luxury teams in Houston in 2016. Whether you’ve done business with us or referred us, we can’t thank you enough for your continued support, and we truly appreciate it. Now, how does a home appraisal happen? If you purchase a home and you get a loan, your lender will require that an appraisal is done before your loan is approved. Although the true definition of a home sale transaction is a price that a willing buyer and seller agree on, the lender will require a third party to visit the property and give it a fair market value. Typically, the lender will loan a percentage amount that’s agreed in the contract. If you’re putting 20% down on the loan, the bank will lend you the other 80% of what’s in the contract as long as the home appraises for the contract amount. The problem occurs when the home doesn’t appraise for the contract amount. When that happens, the bank will still loan the 80%, but only for the appraised amount—not the contract price.

If a home doesn't appraise for the contract price, many different things can happen.

Let’s say you’re purchasing a home for $1 million, you’re putting down $200,000, and the bank is loaning you $800,000. What happens if a $900,000 appraisal happens and results in a $100,000 difference? At that point, negotiations happen all over again, and there are four different options in which all parties can continue:

1. The buyer can bring in an additional $100,000 to the closing table.
2. The seller can reduce the price by another $100,000 to meet the lender’s needs.
3. The buyer and seller can find some common ground and make up the difference. This is typically the most common.
4. The buyer can walk away.

Is a home not appraising a common occurrence? Yes and no. A few years ago after the financial crisis, lenders were extremely cautious, so homes not appraising was a common occurrence. Fortunately, we don’t see that as much now. One thing our team does is meet the appraiser and bring documentation to justify the purchase price. We’ve found this to be a very beneficial thing to do and something that is welcomed by appraisers. As you know, there are many intricacies within this city when it comes to real estate, so this gives them additional information. If you’re buying a home and getting a loan, make sure that you bring all the information you can to get the appraiser to justify the home’s value.
If you have any questions about this topic or are thinking about buying or selling a home, feel free to give me a call or shoot me an email. I’d be glad to help you.

What's Been Happening in the March Market This Year?

What's been happening in the real estate market here in Houston? The key numbers for March are in, and I wanted to talk a little bit about our market's growth so far this year.

Selling in the Houston area? Get a market analysis report

Purchasing in the Houston area? Get full MLS access

What's been happening the Houston market so far in March? I've got some key stats to share today.

The market has shown considerable strength this year and since we haven't really had much of a winter, I think the buying season has been pushed up a bit.

Each price segment in our market has shown an increase in February for the number of homes sold on a year over year basis. In fact, all segments above the $250,000 mark showed double-digit increases. Homes priced above $750,000 were up almost 28%.

Each price segment in our market has grown in February.

On average, prices climbed about 7% and days on market are up just a bit to about 64. Inventory, on the other hand, crept up a little bit to about 3.5 months worth of homes on the market, but we're still pretty low in some areas. Other areas have high levels of inventory. As you can see, due to Houston's size, we live like a group of smaller cities within an area, which is why you need to look at each area on an individual basis.

If we can help you with any of your real estate needs this spring, don't hesitate to give us a call or send us an email soon. We'd love to help you out!