Where & What to Buy
Are condos good investments?
Condominium associations have also worked hard in recent years to clean up their image. Disputes and lawsuits were once rampant. But now associations have become savvier about property management and have taken steps to prevent legal problems and disputes.
How do townhomes differ from condominiums?
Townhouses can be structured in many ways. Some, particularly huge communities, have common areas – such as swimming pools – that are similar to condominiums.
How do you choose a good condo?
Things to consider:
- Get a copy of the latest financial statement from the condo association.
- Ask the board of directors – which is elected by the unit owners from among themselves – if major repairs or improvements are imminent. If so, find out how much they will cost and whether there is enough money in the reserve to cover them.
- Check the by-laws, rules and the covenants, codes and restrictions (CC&Rs). You may find, among other things, that they prohibit or restrict pets and the renting of units. Some may require that the board have the right of first refusal on the sale of any unit.
- Learn everything you can about the homeowners association, including legal disputes and conflicts. Start by reading the minutes of the association meetings.
- Find out the owner-to-tenant ratio. Because many condominiums are often purchased as investments, there could be a high percentage of tenants in the building.
What are the pros and cons of owing a townhouse?
As for the disadvantages, if there is a homeowner’s association, buyers will have to pay a homeowner’s fee. There is also less privacy than with a detached single-family home. And there are limits on how you can make exterior changes to the home.
What is a condominium?
In addition to paying a mortgage, each owner is responsible for paying a monthly fee to the condo association, which is made up of the unit owners. The fee covers maintenance, repairs, and building insurance.
Most housing condominiums are apartments, although there are mobile home condominiums as well.
Why buy a condo?
Unlike a house, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. Many condominium communities also offer amenities such as exercise rooms, tennis courts, and swimming pools that you might otherwise be unable to afford if you purchased a single-family home.
What are co-ops?
Shareholders in a co-op are entitled to occupy specific units, use the common areas, and have a vote in the corporation. To maintain this right, they must pay a monthly fee that covers their share of operating expenses.
As for governance, a board of directors, which is elected from among the residents, runs the co-op. Under most bylaws, the board may evict any tenant/shareholder who fails to pay the monthly maintenance fee. Everyone is expected to abide by the rules, which may prohibit pets or even children under a certain age.
What are the benefits of having a co-op?
Also attractive: housing cooperatives come in all shapes, sizes, and types. They include townhouses, mid-and high-rise apartments, garden apartments, single-family homes, mobile home parks, artists’ cooperatives, and senior housing.
For more information about co-ops contact NAHC at (202) 737-0797, or log on to www.coophousing.org.
Are special tax breaks available for historic rehabilition?
Many states offer tax incentives, reductions and abatement programs for owners of residential historic homes. These programs are described on the National Trust’s web site.
Does the federal government offer home improvement programs?
- Title 1 Home Improvement Loan. HUD insures the loan up to $25,000 for a single-family home and lenders make loans for basic livability improvements – such as additions and new roofs – to eligible borrowers.
- Section 203(k) Program. HUD helps finance the major rehabilitation and repair of one- to four-family residential properties, excluding condos. Owner-occupants may use a combination loan to purchase a fixer-upper “as is” and rehabilitate it, or refinance a property plus include in the loan the cost of making the improvements. They also may use the loan solely to finance the rehabilitation.
- VA loans. Veterans can get loans from the Department of Veterans Affairs to buy, build, or improve a home, as well as refinance an existing loan at interest rates that are usually lower than that on conventional loans.
- Rural Housing Repair and Rehabilitation Loans. Funded by the Agriculture Department, these low-rate loans are available to low-income rural residents who own and occupy a home in need of repairs. Funds are available to improve or modernize a home or to remove health and safety hazards.
How can I finance work needed on a fixer-upper?
Financing repairs and improvements with home equity is okay for most homeowners, but it is difficult for many first-time buyers. They have lower-incomes, smaller savings, and have made lower down payments on their homes than first-time buyers a decade ago. So they have little equity to borrow against. Unfortunately, it is often lower cost older homes purchased by first-time buyers that need the most work.
Unless you have a cash reserve, you will have to shop around for the best borrowing terms. In addition to the options listed above, you can ask relatives for a loan. Borrow against your whole life insurance policy. Refinance your existing mortgage. Get a second mortgage. Contact the government about home improvement programs. And – only as a last resort – borrow from a finance agency, which generally tend to charge high rates.
How do I determine the value of a distressed property?
It is important to examine the fixer-upper carefully and figure out how much it will cost to fix any defects or repairs. If you are unable to get in, talk with nearby neighbors about the home’s condition.
You can also do your own cost comparison by researching comparable properties recorded at the local county recorder’s and assessor’s offices, or at Internet sites specializing in property records. If the property is in foreclosure, you should get as much information as possible from the lender.
Is buying one a good idea in "bad" areas?
What about state and local governments?
At the municipal level, many cities also have programs for special improvements to certain blocks and neighborhoods they are trying to spruce up. Call City Hall, as well as a Community Development Agency in your city.
What guidelines should I use to find a contractor?
Here’s what you can do:
- Avoid the Yellow Pages. Check with family, friends, neighbors and co-workers for recommendations.
- Deal only with licensed contractors. The state licensing board and local Better Business Bureau also can tell you if there are any outstanding complaints against the license holder.
- Interview each contractor, request free estimates, if possible, and ask for recent references.
- Ask for proof of worker’s compensation insurance and get policy and insurance company phone numbers so you can verify the information. If the contractor is not covered, you could be liable for any work-related injury that takes place during the project. Also check to make sure the contractor has an umbrella general liability policy.
- Never hand over a deposit at the first meeting – you could end up losing your money.
What kind of return can I expect from home improvements?
An important point to remember is that remodeling not only improves a home’s livability, it also enhances its curb appeal with future buyers.
Where can you find fixer-uppers?
To determine if a property that interests you is a wise investment will require a lot of work. You will need to figure out what the average home in the area sells for, as well as the cost of the most desirable ones.
Experts suggest that novices avoid run-down properties needing extensive work. Instead, they recommend starting with a property that only needs minor cosmetic work – one that can be completely refurbished with paint, wallpaper, new floor and window coverings, landscaping, and new appliances.
Also, keep in mind that a home price that looks too good to be true probably is. Find out why before pouring your hard-earned money into it.
When looking for a fixer-upper, some experts suggest you follow this basis strategy: find the least desirable home in the most desirable neighborhood. Then decide if the expense that is needed to repair the property is within your budget.
How do I find government-repossessed properties?
The Department of Veterans Affairs (VA) also acquires properties as a result of foreclosures on VA guaranteed loans. These acquired properties are marketed through a property management services contract with a federal bank that then lists them for sale with local real estate agents.
What about guidelines for VA foreclosures?
What are some of the guidelines for purchasing HUD foreclosures?
HUD requires that all accepted offers be accompanied by an earnest money deposit equal to 5 percent of the bid price, not to exceed $2,000, but not less than $500.
Foreclosure properties are sold “as is,” meaning limited repairs have been made but no structural or mechanical warranties are implied. If a HUD home needs to be fixed – and not all of them do – it can still be a bargain. HUD adjusts the asking price to reflect the fact that the buyer will have to invest money to make improvements. The agency also might offer special incentives such as an allowance to upgrade the property or a bonus for closing the sale early. And buyers can request that HUD pay all or a portion of the financing and closing costs. Contact your real estate agent for more details.
To learn more about HUD foreclosures, visit their web site at www.hud.gov.
What are the disadvantages of buying foreclosures?
- There is no financing. You need cash and lots of it.
- The title needs to be checked before the purchase. If not, you risk assuming a seriously deficient title.
- It may not be possible to inspect the property’s interior before the sale. So you have no idea of the property’s condition.
- Foreclosures are routinely purchased “as is,” which means you cannot go back to the seller for repairs.
- Also, estate and foreclosure sales are the only property sales that are exempt from some state disclosure laws. In both instances, the law protects the seller – usually the heir or financial institution – who has recently acquired the property through adverse circumstances and may have little or no direct information about it.
What causes a foreclosure?
Many people lose their homes due to job loss, credit problems, divorce, unexpected expenses, and during periods of economic instability.
Failure to pay property taxes may also cause a homeowner to lose his home. Trouble can also arise when owners neglect to pay local water bills and home insurance premiums.
What happens at a trustee sale?
Trustee sales are advertised in advance and require all-cash bids, which can include cashiers’ checks. Normally, a sheriff, constable, or lawyer conducts the sale and acts as the trustee. Because these sales typically attract savvy investors, inexperienced buyers should come extremely prepared.
Where can I find foreclosure properties?
However, real estate agents are the best source for information about foreclosures before they begin. Often a property will be listed and the agent will know if it is approaching foreclosure. Perhaps the best way to get the information is to have your agent put the word out that you are looking for properties with pending foreclosures.
Another source can be the bank or financial institution that holds the mortgage. Of course, they generally will not give you the names of those who are facing foreclosure, but they may give the property owner your card or phone number.
Buying foreclosures is not easy. Savvy investors are highly skilled at nabbing these properties. Inexperienced buyers may find themselves surrounded by pretty stiff competition. They will need to get as much information as possible, including a “foreclosure inspection report” and an appraisal from the lender.
Can you negotiate the price of a new home?
A builder is more likely to be flexible on price at the very beginning and end of a project. Early on, most developers want to move people in quickly so the project builds momentum. In the end, they may be more inclined to accept lower offers when only a few units are left.
If you are unable to negotiate on price, negotiate for a better lot location or amenities, such as a carpet upgrade or light fixtures. A developer will rarely pass up a deal over a few hundred dollars’ worth of carpeting.
Do builders provide financing?
Should I buy a vacation home?
Some of the tax benefits mirror those for a primary residence. Mortgage interest and property taxes are deductible, which helps to offset the cost of the home payment. And if you treat your second home as a rental property, you can fully depreciate it as well. But you are only allowed to occupy it for two weeks a year, or 10 percent of the total rented time, whichever is less.
Before taking the leap, ask yourself if you can afford to carry two mortgages, maintain two households, and pay the extra utilities and maintenance costs. Also, learn about financing requirements and options, which can differ slightly from those on a primary residence.
Should I hire a home inspector for a new home?
You can ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review.
The inspector should either be a professional home inspector, an engineer, an architect or a contractor. When hiring a professional inspector, look for one who belongs to a home inspection trade organization, such as the American Society of Home Inspectors (ASHI).
This group has developed formal inspection guidelines and a professional code of ethics for its members. Membership in ASHI is not automatic. Proven field experience and technical knowledge about structures and their various systems and appliances are required.
As for rates, they vary greatly. Many inspectors charge about $400, but costs increase based on the scope of the inspection.
What about a vacation home as an investment?
Other things to consider:
- Will you be able to afford repairs, maintenance, insurance, and utilities?
- What about fees to pay agents who rent the property for you?
- If you live several miles away from your vacation home, who will clean up between tenants and take an inventory of household items once the tenants leave?
- What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage?
What else should I take into account when buying a new home?
When the home is on the outskirts of town, ask the developer about future access to public transit, entertainment venues, shopping centers, churches, and schools. Also review local zoning ordinances. A remote area can quickly turn into a fast food haven.
You want to ensure the neighborhood will not spiral out of control and lose its residential appeal.
Other things to consider:
- Ask homeowners already living in a development about the builder. If none currently live there, find out where the builder has previously built and speak to those owners to find out if the builder followed through on promises and needed repairs.
- Ability to make changes. Most homes in a development resemble each other. But the developer may impose restrictions on house color, landscaping, renovations, and other items that a homeowner may want to alter.
- Do not buy into the glamorous images created by marketing experts. Form your own opinions about a property and only buy where you feel comfortable. After all, you are the one who will be living there.
Why is location so important?
Because everyone’s preferences vary, your lifestyle will determine the best place for you to live. Some people prefer the suburbs while others thrive on downtown living. If you favor city living, find out what part of the city suits you best – a fast-paced neighborhood or one slightly more subdued. Talk with the neighbors and keenly observe such things as traffic patterns, lifestyles, and even sounds and smells.
When choosing a town, take property taxes, schools, accessibility to work, services, recreation, and the character of the community into consideration.