Real Estate Property

The thought of owning a second home in the sun or a ski lodge or mountain retreat where we can escape whenever the mood takes us is of course a commonly held dream.

And with the simplification of re-mortgaging facilities, the affordability of home loans and the growth in underlying equity many of us have enjoyed on our principal residences, there couldn’t be a better time to turn that dream into a reality than today.

Here’s how to buy a holiday home abroad and avoid all the common traps and pitfalls that people can fall foul of.

First things first you need to decide whether it make sense for you to release the equity that has built up in your principal residence to buy a property overseas, to raise a mortgage on the overseas property or to pay for it in cash.

Unfortunately there is no straight answer to this dilemma! The answer will lie somewhere among your own personal circumstances, your ability to afford an extension on your home loan or an overseas mortgage, the country in which you’re buying abroad and whether or not it offers good investment potential. However, there are two simple facts that the majority of financial advisers and mortgage lenders agree upon and these may help you make your decision: –

1) taking the money that has built up in equity on one property and using it to buy another property is probably the most sensible thing to do when releasing equity
2) over the medium to long term real estate as an equity class is one of the most consistent returning investment mechanisms.

The next issue relates to which country you should buy your holiday home in. You may have a very positive idea of which country you would most like to spend your holiday time in – if you have a country in mind it’s probably a country you know well and have had enjoyable times in before.

If on the other hand you’re unsure and are looking abroad for a holiday home as an investment property in an emerging market or a market with strong room for growth, you should draw yourself a shortlist based upon what you’re looking for in a holiday home – i.e., if you want a European beach house with 300 days sunshine a year you’re more likely to look at the Mediterranean region rather than the Ukraine or the UK!

Whichever country you’re considering, do research into the laws relating to foreign freehold ownership of real estate in that country and on the projected prospects for the property sector over the medium term – all this sort of information is available on the internet.

Once you have a country in mind you need to set yourself a realistic budget – realistic in that it is an amount you can afford and also that it is an amount that will buy you a quality property abroad. Going back to the Mediterranean region in Europe for a moment, those with a large budget could acquire a decent property on the Spanish coast, those with a small budget could only acquire substandard or renovation property on the Spanish coast but could purchase something far more substantial in the interior of Spain. Think about the amount you can afford and then look at the country you’re interested in – where will you get the most for your money?

Always employ independent legal representation to assist you in any transactions you enter into abroad. You may not fully understand the language or legal system of the country you’re buying your holiday home in so you need a lawyer who does! Furthermore you need a lawyer who is working solely for you and not representing your interests together with those of the vendor or property constructor as well!

Get any contracts or papers you sign officially translated into English before signing, have any promises made or deals verbally brokered written into the contract, make a will that includes your new property purchase and don’t rush into a decision because pressure is being put upon you or because your time abroad to organise everything is short. The world will not run out of holiday homes for sale in our lifetime. If you keep your wits about you and remember the golden rule – i.e., if something seems too good to be true it probably is – you’ll be just fine!


About the author:
Rhiannon Williamson is a freelance writer whose many articles about international property investing have appeared in publications around the world.

Successful real estate investors are well aware that one of the fundamental keys to building a successful property portfolio is the careful timing of market entry; therefore investors always seek to buy ahead of an emerging trend and often take a national or international perspective when looking for the next big thing in terms of real estate.

In 2006 there are five countries that stand head and shoulders above all other nations worldwide in terms of the potential their real estate markets present property investors.

This article offers you an overview of each country so that you can choose where to make your next real estate purchase.

Costa Rica – The CIA World FactBook has recently begun listing Costa Rica as “a Central American success story” because the Costa Rican government have successfully established an economically and politically stable country in which more overseas investors are focusing their financial interests.

The retiree and second home markets in Costa Rica are growing as is tourism interest and the country offers visitors and expatriates a stunning climate, an abundance of rare and beautiful flora and fauna, it is bordered by both the Caribbean Sea and the Pacific Ocean and the standard of living is both high and affordable.

The real estate sector in Costa Rica offers investors an affordable platform and the Costa Rican government offer investors certain tax breaks and incentives to commit to the country.

Ghana – Located in West Africa Ghana is a stunningly beautiful country with palm fringed, white sandy beaches and an incredibly forward thinking and progressive government.

The government of Ghana are committed to improving the economic conditions in Ghana and are targeting foreign direct investment and making significant constitutional changes to allow for freer flowing investment which will in turn attract greater overseas economic interest.

The country has a growing tourism sector which requires accommodation units to let out to visitors offering a real estate investor an immediate opportunity for rental yield. And the long term economic prospects for Ghana are positive which should give a property purchaser long term capital growth prospects from any investment made.

Malaysia – Economically speaking Malaysia is built on very solid foundations and is benefiting from closer export ties to China, low inflation, a small external debt and good foreign exchange reserves.

The country also has a growing tourism sector and a vibrant city based young executive market - either of which a property investor could target for rental income. Real estate in Malaysia is affordable and economic indicators suggest that property prices will continue to rise steadily over the medium to long term giving an investor the chance to reap capital growth from any investment made as well.

Qatar – Forget Dubai for she’s a blown rose! The next big Middle Eastern real estate marketplace is Qatar where constitutional changes have been effected to allow for foreign freehold ownership of property in certain key geographic areas and where overseas investment is flooding in.

The Qatari government are actively targeting foreign investment into all business sectors and establishing an oil-independent economy that should be forever sustainable. The property sector is entirely secondary to the government’s focus, therefore an investor can rest assured that demand for real estate in Qatar will remain strong as the majority of buyers are purchasing for long term accommodation not purely for investment gain.

Turkey – In 2005 Turkey finally began the process for EU accession and immediately received substantial investment commitment from Dubai. The real estate market is already doing very well in Turkey especially in Istanbul and along the Turkish Rivera, but this investment boost will help to raise infrastructure standards in Turkey and has also already boosted worldwide interest in this vast and impressive country.

Real estate investors buying today will benefit from a growing tourism market, increased foreign direct investment as Turkey moves towards EU membership and also a property market that is currently under priced and that has massive room for price expansion.

Hopefully these hot tips will give you some food for thought and assist you with your next real estate property portfolio purchase.


About the author:
Rhiannon Williamson is a freelance writer whose articles about property investing and emerging real estate markets have appeared in publications around the world. She is currently working on a brand new property investment resource http://www.amberlamb.com/

You can sell your own home, but it can be a time-consuming and frustrating process. Usually I would recommend listing with an agent, but in the right market, it may make sense to save the commission and do it yourself. If you try, use the tips here to do it right, and to avoid common mistakes.

1. Understand house values. It's not what you think your house is worth, and it doesn't matter how much you put into it. The value is only what it's worth to potential buyers. See what they've paid for similar homes before you decide on a price.

2. Try to be objective. Get your most honest and open friend to walk through the house with you. He or she will see problems you didn't even know were problems.

3. Make a plan. What will your kids say to those who call? Where will you close? Will your documents be prepared by an attorney? Plan well, and it will all go smoother.

4. Start a list. What needs to be repaired, cleaned, changed, or removed? Always do the most obvious things first.

5. Prepare to sell. List questions a buyer might have, and be ready with answers. Prepare comparison sheets showing other home sales, so buyers can see the value. Make a map showing nearby stores and libraries, etc.

6. Sell the benefits, not the features. Never say "near stores." Instead, say "You can walk to the store in five minutes." Don't just say "garage." Try "No chipping ice off the windshield in the morning."

7. Put all important information in ads. Include the square feet, number of bedrooms and bathrooms, address, telephone number, and price. Leave out the price and some buyers just won't call, plus you'll waste time with others who shouldn't be calling.

8. Listen to buyers. One mistake sellers make talking to buyers is to get defensive about their home. Listen to the criticisms, and resolve them or ask how important the issue is to the buyer. In other words, try to learn a little about selling.

9. Have a clear sales agreement. Be sure it's understood by both sides. What happens, and when? What if the buyer doesn't get financing? What's included with the sale? When will the buyer take possesion? Who pays the closing fee and the transfer tax?

10. Make closing easy. Have documents ready to sign. Prepare answers to likely questions. This may be the largest financial transaction in your buyer's life, so make him comfortable.

There's more than can be covered in ten tips, of course. Use these however, and you'll be doing better than the average seller when you sell your own home.



About the author:
Steve Gillman has invested in real estate for years. To see a photo of a beautiful house he and his wife bought for $17,500, visit: http://www.HousesUnderFiftyThousand.com

No that isn't a misprint. In today's market, you can do better financially by renting rather than buying your next home. Using an old, yet little-known technique, you can own your dream home for less money, less down and lower monthly payment.

Let's say you are in the market for a $250,000 house. For a conventional loan of that size, you'll likely be required to put down 20%, which is $50,000. In addition, you would have to pay closing costs, origination fees, survey, appraisal and points for at least another $5,000. A $200,000 mortgage at 8%, 30 year-fixed rate would be $1,467 principal and interest. Add insurance and taxes and your payment would be about $1,800 per month. So, at closing you'd be out of pocket around $55,000, with $50,000 in equity.

After three years, assuming (for the moment) no increase in the market value of your property, you will have paid your $200,000 mortgage down to about $194,500. Thus, your initial $55,000 cash investment is now worth $55,500 in equity. You don't need an Hewlet Packard 12C calculator to figure out that your return on investment (ROI) is just plain lousy.

Let's look at another scenario - lease/purchase. Let's say you can find someone with a house worth $250,000. Their company has transferred them to another city and they need a quick solution. You offer them a full price lease/purchase with $1,600 per month rent (about market for that price range) and 25% rent credit (pretty standard) towards purchase. You give them an additional two months' rent ($3,200) as option consideration to be applied towards purchase.

You move in tomorrow - no points, closing costs, etc. After three years, your equity is your option consideration ($3,200) plus your rent credit ($400 x 36 = $14,400) for a total of $17,600. Your ROI is about 500%.

"Yes, but I haven't bought the property, yet," you say. Of course, yet equity is still equity; your equity in the first scenario is not realized until you sell. Likewise, your equity in the lease/purchase scenario is not cash until you exercise your option to buy and then sell it. Here's the solution. . . sell your option before the end of your lease term.

If you live in the property, wait until about 6 months before the end of your term and start advertising the house for sale. If the market is somewhat good, you should have no problem selling it. Once you have a buyer lined up, you simply exercise your option to buy and simultaneously sell it for a profit (by the way, you don't have to live in it the whole time; you can always sublease it if you find another house you would like to live in).

Why not just buy it, as in the first scenario, and sell it three years later? The answer is simple - you would be back in the same position as you started (probably worse, since your $55,500 equity would be liquidated into less than $50,000 after closing costs).

What about inflation? In either scenario, you would benefit from inflation, since the option price in the lease/purchase scenario locks the price. However, you would fare much better with a lease/purchase, since your ROI would be much greater.

Let's look at some numbers. Suppose that over the next three years it appreciates a total of 10%. The house would now be worth $275,000. In the buy, hold and sell scenario, your total profit would be $30,500 ($25k appreciation + $5500 loan paydown), about 60% ROI. In the lease/purchase scenario, your profit would be $39,400, but your ROI would be over 1,000%!

Let's look at the down side. Suppose the real estate market drops 10%. In the first scenario, you would have trouble selling the house for a profit. You'd be just like the guy you bought it from. In the lease/purchase scenario, you wouldn't win either. BUT YOU WOULD ONLY LOSE YOUR $3,200 OPTION MONEY! (which could be a deductible as a loss if you argue that the money you paid for the option was a business investment). Isn't it better to rent for a few years and walk away than to be stuck on a thirty year mortgage?

The final point you may be wondering about is the home mortgage interest deduction. In the first scenario, assuming you are in a 30% tax bracket, you would save about $14,200 in taxes over three years. However, you lost the use of the $50,000 you put up front to buy the house!

Let's take the difference between the $3,200 option money in the second scenario and the $50,000 in the first scenario (total $46,800) and loan that money out as "hard money" secured by real estate. At 14% for three years, you would earn almost $19,656 interest (not including the generous points usually collect on hard money loans). Thus, the benefit of the mortgage interest deduction hardly compensates for the poor ROI in buying, holding and selling. In any event, Congress may decide next year to take away the mortgage interest deduction. History has taught us that we should NEVER buy real estate for the tax benefits!

Keep in mind that the figures I have used here are based on the best scenario for a purchase and the weakest scenario for a lease/purchase. You could probably negotiate a lower monthly rent and purchase price if you find a motivated enough seller.

Lease/purchase will not fare as well in lower-priced homes, because the rents will often exceed the typical mortgage payment. However, it works even better on the very expensive homes. On high priced homes ($500,000 and up), you'll have to put down closer to 25% as a down payment. Your ROI goes way down when you have to plunk down $100,000 or more on a house. Try the above comparisons on a $500,000 home and you'll really see that there really is no comparison, since the rent on that kind of house would not exceed $2200, yet the mortgage would sky-rocket to $3,500 or higher.