Property and Real Estate Resources

Construction loan mortgages can turn a vacant piece of land – whether in a not-as-yet developed suburban tract, or the wilds of a favourite rural escape – into a person’s dream home, chalet or vacation retreat. Because these loans are the vehicles that turn a person’s vision of where they would like to live, or where they would like to vacation or retire, they are sometimes referred to as “dream loans’. And everybody has to have a dream.

Construction loan mortgages are typically designed to start as an interest-only loan under which funds are released to the homebuilder in stages as construction progresses. So much is released to purchase the property, so much when the foundation is built, when the structure of the home is enclosed etc. Ultimately, when construction is completed and an occupancy permit is issued, the interest-only construction loan is then rolled into a home mortgage with the standard amortization terms and payment structures etc. of a normal home mortgage.

During the construction phase of building such a “dream home”, the construction loan that funds the project will typically be an interest-only loan with variable rate interest. After all, in most instances the person who financing construction of his or her dream will most often be living off property in a second home, or otherwise renting or paying for accommodation. Upon completion, the construction loan is paid off, and a regular mortgage is drawn up on the property. The advantage of a construction loan mortgage is that the same lender can often be found to complete the financing of the homeowner/builder’s project: funding short-term construction coasts, and funding the long term mortgage on the property.

Most lenders will offer one or many varieties of such loan/mortgages. Working with a lender that will finance both ends of the transaction cuts down the application and its incidental costs and allows the homeowner/builder to negotiate favourable mortgage terms for the long haul.

A mortgage broker with experience in handling construction loan mortgages can guide the person building his or her dream home with the advice and expertise that will guide a first time builder through the process. Lenders will not typically finance all of the costs for the construction project – although, generally, a mortgage broker can help arrange financing for up to 95% of the project.

An experienced mortgage broker will be able to provide expertise and guidance with respect to (i) acquisition of the land and arranging servicing of the building lot, (ii) construction financing and planning when and in what amounts to draw down funds from the construction loan, as well as (iii) assistanc with converting the construction loan into a regularized mortgage when construction is complete and your dream home is ready for occupancy.

Comparison shop when looking for the best terms for your construction loan mortgage. Enlist the help of a mortgage broker who will be able to connect you to a host of different lenders. Compare their terms. Note that it could be worthwhile to pay a slightly higher interest rate during the construction phase, as this will be a relatively short-term cost, if you can get better mortgage terms later from the same lender, versus going to other lenders. Shop around, work with a broker, and do not be afraid to ask the question that will help you turn your dreams into your reality.

Homeowners looking to stop foreclosure are faced with a number of options, one of which is doing a short sale. Some people, depending on their situation, may allow a property to go into foreclosure instead of attempting a short sale. One reason is they don’t want to keep the home in the first place. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. The primary consideration above all is the affect both can have on your credit score.

The Basics Of A Short Sale

The concept of a short sale is fairly simple. A short sale occurs when the sale proceeds of a house fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. A few words of warning are in order. Not every lender will negotiate a short sale. If for example your payments are current, yet you foresee imminent cash flow problems arising that will affect your ability to make your monthly mortgage payment. Lenders have no interest in negotiation unless your payments are several months late. Another consideration is you may be held liable for taxes on the difference between the sale amount and the original loan amount. Short sales require nerves of steel.

The Credit Affects

Foreclosure

Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points.

Short Sale

Short sales have a far less damaging affect on a seller’s credit report. Credit scores typically lose between 80 to 100 points. What happens to your credit down the road? It is takes around three years after a foreclosure before a lender will offer a sensible interest rate, whereas for a person who went through a short sale typically waits around 18 months to buy another home at a good interest rate.

Salvaging your credit should always be the primary concern when making the decision between a short sale and stopping foreclosure. The savings in interest payments alone should be convincing enough for most people, not to mention your buying power in the near and distant future.

Once a home reaches pre-foreclosure or foreclosure status it is in the best interest of the lender, and the homeowner to ensure that the property sells quickly, and the balance accrued on the property is promptly taken care of with the profit gained in the sale of the home to the highest bidder. The lending company is given what it is owed, and the remainder to the homeowner. Often, the homeowner gets very little – and thus, reason why a homeowner should not let the home to go into foreclosure.

The key to a successful pre-foreclosure or foreclosure sale is to sell quickly. This will increase the profits made while decreasing the interest and other charges that are being accrued by the lender. Here are some techniques to promote the quick sale of the home:

Home Staging has been referred to as the secret weapon real estate. Research has shown that staged homes are on the market for an average of thirteen days, compared to the average of thirty-one days for homes that have not been staged. During the process of staging the home there are five aspects that should be considered. A diagnostic report should be completed of the home entailing what needs to be changed, renovated, etc. to make the home more attractive to potential buyers. Second, the home should be removed of all clutter, and personal effects. Third, colors in the home should be muted, and neutral. When a buyer walks into the home they should be able to see their life within the walls, not the present residents. Fourth, the home should be clean – and move in ready with new paint, trim and details. Lastly, the home should have curb appeal. A new door, or fresh coat of paint on the door, a manicured lawn and some plants can go a long way in bringing potential buyers into the home.

Staged homes have been shown to sell more than six-percent over the listing price, compared to homes that have not been staged. Staging can cost as little as two-hundred dollars and the profits yielded are well worth the investment.

Pricing is crucial. Once a home reaches foreclosure the lending company is more than likely taking a loss on the property. Asking too high above the balance that is owed on the home, which will go to the homeowner – may deter buyers because it is public record once a home reaches foreclosure. Pricing too little could arouse suspicion in some buyers.

Who is the balance of the mortgage owed to? It is important to consolidate the mortgages with one lender, rather than have two lenders that are owed money because this makes the process more complex.

Prepare the buyers to exit the property and ensure that all paperwork is in order. This way, the new owners are able to move in. A key selling point within the sale is going to be the low price. Entice buyers further with fast closing times, and quick possession dates.

Using these tips should ensure a quick sale – which will not only benefit the seller, but the lender as well.

In order to avoid any unexpected tax bills while owning your property in France it is important to know the French tax system. Here we outline the main sources of tax in France and explain how they may affect you.

Tax: Should you live in France you will be taxed on your total income whether generated within France or abroad. It does not matter what nationality you are if you spend more than 183 days per year in France you are considered as French domiciled and still taxed on your world wide income. For those not domiciled in France you are still liable for any income from French sources; this includes rent from letting out your property and any income derived from working in the country. The authorities in both the country in which you normally reside and France will be interested in your earnings and if it is above a certain threshold you could be liable in both countries unless there is a double tax treaty between the countries as exists between all EU members and many other countries. However it is very important to notify the authorities if you are making a permanent move to France before the event in order to take advantage of this treaty. It should also be noted that in France taxes are not deducted using the PAYE system as in England but each individual must fill in their own self assessment form whereby taxes are paid the year after which the income is earnt which runs from January the 1st to December the 31st. To do this you must first register at the “Centre des Impots” which is the local tax centre.

Income tax: This ranges from tax levied on “earned income” which is a progressive tax to tax on “unearned income” such as investment income based on interest from bank accounts and property yields. There is a seperate tax levied on your gross rental income if you let out your French Property. France still strongly favours the family unit and there are distinct advantages in terms of reduced tax liability if you are a large family as tax is assessed on a household basis. If you are married and/or have children in the family you pay less tax as there are more dependants; this is called the “quotient familial”. There are also other allowances such as those for childcare and domestic help all of which go towards making large families in France pay less tax than anywhere else in Europe. If you are unmarried or united only by the PACS agreement then you are likely to pay more tax than married couples not just with regard to income tax but also inheritance tax.

Property tax: Two property taxes exist in France: taxe fonciere and taxe d’habitation. Taxe fonciere is paid by the property owner regardless of whether you live there or abroad, but there is an exemption for two years for newly built properties. Taxe d’habitation on the other hand is paid by whoever occupies the building at the time, hence if it is rented out it is paid by the tenants. Both taxes form part of what we know in the UK as council tax and are paid the year after the rental period with special allowances for retirees and dis-used, inhabitable properties.

Capital Gains Tax: This tax is paid on the profits of any property which has been sold to include jewellery, securities, shares and real estate. However, fortunately there are no taxes to be paid on the sale of your principle residence but only on sales of additional property. People who rent their main home are exempt if they sell their second home as well as those who have owned the house for 15 years or more. If a property is sold within two years then it is subject to 33.3% capital gains and this falls by 5% a year and multiplied by an index linked multiplier of the eventual sale price of the property until the 15 years are up. If you have renovated your property or spent money on legal or agency fees the cost of these can be offset against your profits.

Inheritance tax: The system in France is very different to that which you might find in England or anywhere else and it is advisable to talk to a tax advisor BEFORE you buy your property in France to prevent future burdens on your family or partner. Whether you are a resident or not in France you will still have to conform to french succession law and your family will still be liable to pay inheritance duty in France upon your death. It is also important to note that French succession law will not allow for you to leave out any of your children in favour of your spouse and will ensure that they get their share. There are however, a number of different ways to minimise their burden depending on your situation. Below we outline a number of different contracts that can be made. A very popular and useful way of lessening your relatives’ inheritance tax if the tax in France is greater than it would be in your home country is to form an SCI which is a property holding company. The property in question can be divided into shares and these shares can be distributed as you wish with the result that any future inheritance tax on the property will be subject to the laws in the country in which you are a resident. It is also a good solution for those in a complex family situation living with people who are not members of their family. Shares can be freely given to a partner or children whereby inheritance tax will be avoided if done at least 10 years prior to death of the owner of the shares. For married couples who wish their half of the property to go to the surviving spouse then the “clause tontine” is a good option. It is like a joint tenancy agreement and essentially suspends the ownership of the property until either spouse dies so that the entire property is owned by the surviving spouse. They will, however, still have to pay inheritance tax on half of the property. Another way to ensure that your half of the property in question goes to your spouse is to make a change of the matrimonial regime so that your properties are no longer separated. You must have been married for at least two years and prepared to pay some legal charges but it will mean that the surviving spouse will only pay 1% tax on the property as “registration duty”. This system can get complicated if there are children involved from current or past marriages as they still retain certain rights to the property and legal advice should be taken. In 1999 a new contract called PACS was also brought in under French law giving certain benefits to same and different sex couples which were not previously available. These inheritance and fiscal rights are not as beneficial as those available to married couples but are certainly an improvement on the previous situation.

Wealth tax: This is a tax levied on assets that exceed 720,000 Euros and covers a wide range of assets to include your property and bank balances amongst other things. If you are resident in France but not domiciled there then you will only be taxed on what you have in France. If domiciled there as well then the tax applies to your entire fortune all over the world.

This article covers six dynamite real estate investing tips intended to help anyone just getting started in real estate investing to successfully launch and hit the ground running with real estate investment property.

1. Develop the Correct Attitude

To stand a chance of succeeding at real estate investing, foremost, you must understand that real estate investment is a business, and you will become the CEO of that business.

As your first order of business, then, it’s crucial to develop the correct mind-set about investment real estate and be able to make this distinction between buying a home and investing in real estate:

“You buy a home to live and raise a family; you buy real estate investment property to pay for the home, live comfortably, and raise your family in style”

As one very successful real estate investor said, “Only women are beautiful, what are the numbers?” In other words, you will not succeed at real estate investing until you acknowledge that it’s not curb appeal, amenities, floor plan, or neighborhood that should turn you on or off to the investment opportunity; what counts most is the property’s financial performance.

2. Develop Meaningful Objectives

A meaningful set of (realistic) objectives that frames your investment strategy is one of the most important elements of successful investing. Yes, we may all desire to make millions of dollars from real estate investing, but fantasy is not the same as expressing specific goals and a method on how to achieve it.

Here are some suggestions:

How much cash are you willing to invest comfortably? What rate of return are you hoping to achieve by making the investment in real estate? Are you expecting instant cash flow, looking to make your money when the property is resold, or merely looking to achieve tax shelter benefits? How long are you planning to hold the property before you dispose of it? What amount of your own effort can you afford to contribute to the day-to-day operation of running the property? What net worth are you hoping investing will help you to achieve, and by when would you like to achieve it? What type of income property do you feel most comfortable owning, residential or commercial, or does it matter?

3. Develop Market Research

If you’re new to real estate investing, you undoubtedly know little about investment real estate in your local market. So, do market research to learn as much as you can about income property values, rents, and occupancy rates in your area. The better prepared you are, the more likely you are to recognize a good (or bad) deal when you see it.

Here are some good resources:

(a) The local newspaper, (b) A local appraiser, (c) The county tax assessor, (d) A qualified local real estate professional, (e) A local property management company

4. Run the Numbers

I can’t stress enough the importance of running the property’s cash flow, rates of return, and profitability numbers. Remember, real estate investing is a business, and as the CEO of your investment enterprise, you’ve got to know what you’re buying, especially if you’re trying to determine which of several investment opportunities would be the most profitable.

You have two options:

(a) Invest in real estate investment software. This will enable you to discover for yourself the investment property’s cash flow and rates of return, and create your own analysis reports. Plus, by running the numbers yourself, you gain a broader understanding of real estate investing nuances, and in turn might be less likely to fall victim to the wiles of someone with little concern about how you spend your money.

(b) At the very least, work with a real estate professional that has invested in real estate investment software and can calculate, present, and discuss the property’s financial data with you.

5. Develop a Relationship with a Qualified Real Estate Professional

Working with a qualified real estate professional is a great way for beginners to get started with rental property investing because an astute professional can acquaint you with local market conditions, recommend a property that meets your investing objectives, and discuss strengths and weaknesses about specific property performance.

Here’s a warning, however: Work with a real estate person who understands investment real estate.

Be sure the agent has a firm grip on key financial measures inherent to real estate investing, knows how to measure profitability and rate of return, has the ability to present the data you need to make wise investment decisions, and, most importantly, shows a genuine interest in how you spend your money. The last thing you want to do is to get involved with a real estate agent that would throw you under the bus just to make a commission.

Here’s a good way to interview for an agent. Ask them for the property’s cap rate and then request an APOD. If their response (even to these basics) is to stand there looking at you like a deer into the headlights of a car, find another agent.

6. Start Investing

Hopefully, this has given you some insight into real estate investing, highlighted a few things to make you a more prudent real estate investor, and perhaps alerted you to a couple of things that should be avoided.

Okay, that does it for us, now it’s time for you to get started. Here’s to your success.