For years, real estate – property – has been one of the best investments you could make, even during a recession. How so? In a recession, you can often buy buildings and land for a lower price than at times of prosperity – you just need the patience to hold on to it.
In the good times, purchasing a property can actually become harder. If a property is priced sensibly – and that often means “below market value”, or how much it is perceived to be worth – then there will be a lot of interest. It does not matter if the property in question is a repossession, priced sensibly for a quick sale, or has been owned for years with little or no mortgage, as long as the price is reasonable, people will be interested.
In these cases, it is easy to get caught in the “eBay trap” – we’ve all seen it. Something is for sale on eBay, and you place a bid for slightly lower than you would pay if you went to a shop. Someone else bids a few pennies higher. You feel this was your item, so you bid higher. Someone else bids. The original bidder will bid higher. You….give up and move on to something else, because you are a responsible member of the tribe. The other two bidders outbid each other for the last two minutes of the auction, and the item goes for four times the original value.
The same things happen with properties – as the price started low, people are willing to make higher offers if other people are interested – and it quickly gets out of hand. It’s not uncommon for prices to go up to 10 or 20k higher than the original asking price, and as the original price was “reasonable”, there’s no problem with getting a mortgage as the property could quite likely be valued much higher.
And you end up paying far more than you originally intended – don’t forget, the interest on your mortgage will be higher if the total amount is higher. It’s a double price rise every time you move up in cost.
So take it easy, and makes offers with your head – not your heart. Other properties will become available, just bide your time and don’t get the eBay fever…
Many houses may seem like a good buy – especially at auction – but you need to be very careful. Buying a house is one of the biggest investments you will ever make – whether it is a home for yourself or as an investment opportunity.
Always go and look at a property before you buy it. If something is going cheap then there is usually a reason for it, and photographs do not always tell the whole story. Have a good look around inside and out. Knock on walls, go into the attic, and take a good look at the roof.
The most common mistake people make is thinking that you can get away with repainting and changing carpets – sometimes maybe you can but more often than not there are greater issues that need dealing with. If you can find a property that just needs cosmetic work, then great – but, for example, if there is a problem with the roof, it can turn out to be a very expensive job.
Bathrooms and kitchens can be replaced fairly cheaply, but you need to be aware of how old the electrics are, and check the windows and doors – just because they are double glazed it does not mean that they are fine. Cracks in walls can often be hidden by wallpaper so look for structural movement outside and any repointing issues that need addressing. I always advise that you take out a full structural survey, and if you are at all unsure have a gas safety engineer and an electrician give the place a once-over.
These things can seem like an unnecessary expense, but if you look at the big picture then you are better off spending a few hundred dollars and pulling out of purchasing a property, rather than spending thousands later – just because you don’t want to go to the expense of spending money on surveys, it doesn’t mean your buyer won’t!
You will need to add up all of the costs of repair, the house price, legal and conveyancing fees, and other costs incurred in the buying process. If the selling price allows a healthy profit then go for it – but bear in mind that things can cost more than people budget for.
OK, I’ve bought it – now what?
Selling a lifestyle
What we have learned from numerous TV shows over the last few years is that you need to do certain things to your property to ensure it sold. But are these things still relevant today, where we are in the aftermath of a banking crisis, going through a recession, and mortgages are harder to come by?
One thing is for sure – you don’t get a second chance to make a first impression when selling your property. If you can create the impression of a bright and airy property that is clean and spacious, you stand a better chance of selling – and at the price that you want to achieve.
It is common for a buyer to offer 10%-25% less than the asking price, often citing instances of work needing doing or changes that need to be made. With a great looking house and a fairly neutral color scheme, there’s not a lot that can be said that needs doing – you are effectively offering a spacious blank canvas for the buyer to stamp their identity on.
In any economic climate, it is always worth making your property more desirable, but there is no need to go overboard, as long as jobs are done right. The quality of the finish is just as important as the kind of work that is done – a carpet that is fitted with gaps around the edge, or a bathroom that is re-tiled with tiles that don’t match or line up is liable to decrease the perceived value of a property rather than increase it in the eyes of the buyer.
The Incredible Shrinking House
But more than that, a cluttered property can hide things. You might be thinking along the lines of “good – I need to hide that crack in the wall” but in reality that won’t work. Any right-thinking buyer will have the property surveyed before parting with their cash, and a surveyor will pick up cracks in the wall. The most valuable thing that clutter hides is space.
A roomful of this-and-that hides the size of the room. It might be the biggest room in the house, but it looks half the size it should because the true amount of floor space is not on display – and why would a buyer offer the full price for a half-sized house?
Think of how you feel when you have surprise guests round to visit. Do you shut doors to hide the clutter? Throw everything quickly in a cupboard? Keep them in certain rooms and facing in a certain direction? Are you really embarrassed by the perceived mess? Then how do you think you could sell a property – a home, even – in the same state?
Selling a property doesn’t necessarily require minimalism, but it does work better if a buyer can truly see what they might be buying. If it is hard to see through the clutter and the buyer can’t figure out if their furniture is going to fit, you aren’t going to make the sale – or if you do, it will be for far less than you want.
If you think that clutter is an essential part of the way you live…then you aren’t really trying to sell the place.
Stay away! Unclean!
And here’s another thing – if you are worried every time there’s a knock at the door because it might be someone who wants to come in and see you, ask yourself why. If the clutter lying around is having a deep effect on you, whether you are selling or not it is probably time to clean up!
A common perception is that clutter and untidiness equate with dirt and filth. It is entirely possible to have a very cluttered but sanitary home, but getting people to believe that is the case is another matter entirely!
From the psychological effects to the social status to the profit you lose if you are selling, there really is no excuse for having clutter lying around – and it’s time RIGHT NOW to do something about it!
Find great tips on decluttering quickly right here: http://www.declutterfast.com/
Get the work done
Always try to bring the place up to par. If major works such as electrical wiring or structural repairs need carrying out then it is best to get a professional in and budget accordingly – that way you should only be left with these smaller jobs:
Painting: For the best finish always strip walls of any wallpaper. Then fill in any holes or cracks, sand it down and paint over it. This may be time-consuming but it’s a lot cheaper than re-plastering – most of the time the buyer will think that it has been re-plastered. You can get trade tubs of paint which would cover most smaller houses. Be careful though as I have found some very cheap brands to be too thin and watery so you need more coats which is a false economy – if at all possible get a small tester pot first. I usually go for magnolia – it may seem plain and boring but at least the buyer’s furniture will match until they can get round to redecorating. Also always use matte rather than silk paint as you get a much better finish and blemishes are harder to see!
Have you ever wanted to paint a room in your home but struggled over the choice of what color paint to use? Or have you managed to use so many different colors in a single room that it looks like an explosion in a paint factory? You’re going to need some help in choosing what colors to use.
Enter House Painting Tutorials and “Paint Color Cheat Sheets”.
You’ll find out about the best paint colors that always work and are proven, tried & tested in real life. The system is as close to foolproof & no-fail as you can get!
It’s easy to get overwhelmed by the thousands of paint color choices out there, and you often can’t make up your mind because a lot of the colors look the same to you. You end up feeling like you spend more time choosing and stressing out over the paint colors than actually enjoying them!
When you want a beautiful and tasteful home, but can’t afford to hire a color consultant, the only option you have is to do it yourself – but disaster strikes when the color that looked perfect on a swatch turns out different and all wrong on the walls.
“Paint Color Cheat Sheets” were created to help you find the right paint color for your home, easier and faster. All the hard work has been done for you, by eliminating all the wrong options and narrowing down the choices to only the best few. In other words, the Paint Color Cheat Sheets are as close to foolproof as you can get without days or weeks of choosing.
All experienced professional decorators and color consultants have a “go-to” file that consists of a small number of colors they refer to again and again in their work – why shouldn’t you do the same thing?
Flooring: The cheapest thing to do is re-carpet but if you have no experience with this it’s time to call in a professional. I always go for the cheapest plain beige/light brown carpet, you can usually get away with no underlay and find a local carpet fitter to come and fit it. These can be found in local newspapers or free local magazines. In the kitchen and bathrooms go for vinyl instead of expensive tiles.
Kitchen: Shop around and buy the cheapest flat packed kitchen you can buy. You don’t need to put expensive appliances in, you can always buy the appliances second hand at a fraction of the cost. You can make the kitchen look more expensive by getting nice handles or a great work surface.
Bathroom: Bathrooms can be bought for less than $300 – if you can’t replace it yourself get a local handyman to do it for you, they can usually do it faster and cheaper than a plumber. When it comes to tiling then either have a go yourself or get the handyman back in!
Garden: The easiest and cheapest thing to do is just tidy up what is there. You should make this one of your first jobs as it can take a few weeks to turn yellow grass green again! Failing all else rip it up and lay new turf yourself. For the cheapest place for turf either search Google for your local area or try the Yellow Pages.
Staging the property: If you are planning to stage your house to sell it then don’t buy anything new, there are plenty of bargains to be had on the internet and in local papers. You can then sell it on afterward or use it in your next property.
When people initially move into a property, they expect that there will certainly be a particular level of security present – it can even be a selling point. It is natural to have locks on the entrances, maybe a peep-hole to look through to see who’s outdoors, and gates and fences are also common…although none of that is generally enough to deter a criminal intent on robbing your home.
You can expect to think about installing or upgrading your home security systems, and here are some of the standard methods of upgrading your home security system that you may use.
Always remember, it’s not invariably the most expensive solution that is the most beneficial, and it’s down to your personal situation as to which is best for you.
Locks, bolts, bars, and chains
Securing your windows and doors can be done in the most rudimentary style – additional locking devices. Updating doors to 5 or 7 point locking systems will help prevent unwanted trespassers while adding locks to house windows will likely further enhance your safety.
Mounting bolts and chains on the doors add extra levels of security, and may one be visited by a stranger, under no circumstance do you have to open the door without making use of the chain.
In serious cases, bars can be put on your windows to circumvent entry from the exterior.
You see these all the time – or rather, we hear them. Bought as an individual product, simple systems can be put in by anybody although many specialized systems call for the participation of a professional. A noisy alarm and/or flashing light is triggered with devices scattered around the household, and is typically deactivated by entering a code on a keypad or simply by using a physical key.
Whenever sound and lightboxes are positioned on the outside of the dwelling, this can act as a deterrent as there is the potential for the alarm to go off and also for the culprit to be trapped – however, this method does depend on an individual getting in touch with the police to investigate.
Security businesses will offer this particular service that negates a portion of the problem of a standard alarm – you don’t need to rely on an unknown 3rd party to contact the authorities, as the system is watched 24/7 by the security firm. Assuming the alarm is triggered, the security team calls either yourself or even an authorized key holder to notify them of the problem.
If you are genuinely concerned about the protection of your residence, you may have your alarm connected directly to the police – for a charge. Remember, this is not a guarantee of instantaneous service from the police department, merely a guarantee that they’ll learn of the situation.
If greater priority events are taking place than a suspected break-in, they will of course get priority. This does however eliminate a step, as no human needs to interact with the alarm and phone systems to get in contact with the cops, and a suspected burglary is taken just as seriously if it is called in by John Q Public or by an alarm system.
A further note on programmed diallers is the fact that should they register numerous false alarms, the police may stop addressing the calls until it is verified that the alarm system is repaired.
Does the property need extra security?
Only you can decide, based on the location of the property and the crime statistics for the surrounding areas.
What is it going to cost me in total?
There is more to renovating than the costs of the work involved. To start with, there are the legal costs involved in the purchasing of the property. If you are applying for a mortgage, there is usually an upfront fee to pay for the survey for your mortgage – this is usually only a valuation; the property will not be structurally inspected unless you pay extra. I always advise that you get a full structural survey, electrical and gas checks before committing to buy. It may cost hundreds but could save you thousands!
After all of this is taken into account, you will then need to add on the cost of all works that need carrying out on the property. It may seem like a good idea to cut costs on certain things but if the subsequent purchaser does the relevant checks, or even just looks in the cupboard that you didn’t fix properly, it will cost you more money in the long run. It is worth bearing in mind that budgets are very rarely stuck to – there can be expenses that you weren’t expecting or prices may just be higher than you thought.
After the renovation is complete you may have further legal costs and selling fees to be paid. Your mortgage may have a redemption fee that can run into thousands if you repay your mortgage before the end of the term. All of these need checking and taking into account when deciding if a property is a worthwhile investment. If after all of your hard work there is no profit (or very little profit) to be made then you may need to look for a different property to make your money.
Do you need a renovation loan?
Not long ago, homebuyers could choose from a wide range of properties for sale – but today, things are very different. With crushing financial problems, a pandemic to deal with, and difficulty obtaining mortgages, people are finding it difficult to move on. This can mean the number of homes for sale at the moment is at an all-time low.
This in turn is creating a “seller’s market”, as there are often several potential buyers for a single property, creating bidding wars of the like not seen for years.
But there is one type of home that is currently being overlooked by almost everyone except the astute investor – properties in need of renovation.
And “renovation” doesn’t mean rebuilding – it’s often just aesthetic. A touch of paint, a new floor, and the home is as good as new – but available at a much lower price, and often in a location that you might think you can’t afford.
In the US, home renovation loans are the new hot product, allowing buyers to get a property at a good price, and then have the funds available to upgrade the kitchen, redo the garden, etc.
A renovation loan is designed for exactly this situation and covers both the cost of the mortgage and repairs to the property. Properties that require updates are typically listed at a lower cost and often go unsold, due to their outside appearance and the notion that it will take a lot of work to get them in a liveable condition. Buyers can use a renovation loan to get into the location of their dreams, and can quickly build equity while designing a home to their personal preferences.
Requirements for the borrower vary, as do the amount you can borrow, and the overall structure of the loan, but generally speaking the loan is based on the estimated home value after improvements, and buyers will need to obtain quotes from licensed contractors to help determine the total amount, as well as an estimated timeline.
When conditions are similar the world over, it makes you wonder why this seems to be a particularly American loan – such a system would surely benefit the property market in most countries. It is exceptionally hard in the UK to find anything that even approaches the usefulness of this type of loan – bridging loans are occasionally suggested but are nowhere near as flexible, cheap, and simple to find as a home renovation loan.
So how much is your property worth? How much could you sell it for?
Is the answer to these two questions a very different number?
In your own area, you will find properties at varying prices – it is rare for two properties to be up for sale at exactly the same price. Some will price high and accept an offer, some will price low to sell quickly and generate more initial interest. You will find that the true value of your own property is somewhere in the middle.
The problem you encounter as a seller is convincing buyers that your property is actually worth that much money. Everyone wants a bargain, and even more so in times of economic trouble. One of the largest expenses can be down to the method you use to market and sell the property.
Breaking the traditions
Contrary to popular belief there are different ways to sell your property. For most people, an agent is the way to go, but their fees can vary greatly from 0.5% to 6% commission – this soon adds up if your property is worth a considerable amount of money. This being said, good agents should be able to sell your house quickly and at the highest possible price. You should always get 3 valuations. Some estate agents may overvalue to get your business, but when your house has been on the market for some time they will soon want you to drop your price so they can sell your house and get their commission in. At the opposite end of the spectrum, they may say a lower price to get a quick sale to get their commission in. It sounds tricky and complicated but it isn’t. There are plenty of websites out there that will value your property for you with an online tool – alternatively, you can check out what similar houses are selling for in your area – not what they are for sale for, but what they are selling for.
You can always go to an online agent – they take an upfront fee and then advertise your house until it is sold, some handle phone calls, some hand out your details for prospective buyers to get in touch with you directly. Fees for these types of agents can vary greatly and you are really paying for them to put your property on all of the major commercial house-for-sale websites that only allow agents to advertise and not private sellers.
There are benefits to both approaches. An online agent tends to cost far less and often provides you with features to help manage your property online. You can have instant access to reports on the popularity of viewing your property too, and your property can usually be seen worldwide within minutes.
A traditional agent may offer a more personal approach, but may not be too quick to get you online – a delay of a week or more is not uncommon. These agents are also more likely to advertise your property in the local press and have the advantage of having a presence in the high street that a casual passerby may notice.
With both styles, customer service will vary widely and depend entirely on the company involved.
Another option is for you to go it alone, as there are websites for you to list your property for sale yourself – these either charge a flat upfront fee or are free. You can always have your own sign made up very cheaply and then you will attract passing trade too.
Buy! Sell! Rinse! Repeat!
Whatever you do, you can do this for as long as you want – buy as low as you can, sell as high as you can, and invest some of your profit in your next purchase. Once you are up and running, this is an exhilarating way to live – and it can be enjoyable and extremely lucrative too.