Special Use Appraisal Interview

Zack Kaufman

Fin 181

Dr. Hansz

Special Use Appraisal Interview

For blog post assignment two I interviewed Tom Austin. Tom is a commercial appraiser of mainly office buildings but also appraises special use commercial buildings. Tom is very meticulous and detailed in his work and passionate about what he does. However, Tom is very careful when approached with special use appraisal projects. He knows what he is specialized in and if a special use property is too far outside of his specialty, he will often refer it to someone else to assure the best and most appropriate opinion of value is stated to that client. The property that we discussed is a trade school called Gayland College.

To start Tom is an Alumni of Fresno State getting his degree in Real Estate and Urban Land Economics in 1987. However, had been working for an appraiser since 1985 while he was attending college and once he graduated he never looked back. His passion for appraisal led his to be a Certified General Appraiser and a member of MAI.

The property Tom appraised was a 8,358 sq. ft. C-P building in Fresno. A bank came to Tom for a particular appraisal problem. The bank needed a building appraised for financial purposes. The college pursued a loan, so the bank needed to see how much the building was worth so they could work out the numbers with their client. Tom Austin’s problem was determining his opinion of value of the property. It was a school inside a building zoned for general commercial. (C-P).

Tom had to decide how he would appraise this building and what approaches he would use. The property was built in 1950 but renovated in 2000. Tom concluded its effect age was 20 years, not the whole 61 years of its existence. After determining the highest and best use of the property was in-fact a school, he proceeded with the project. He considered other possibilities of its use but any changes needed accommodations that would make its use less feasible. So with that in place, the real only best and most accurate appraisal approach would be sales comparisons. In Tom’s comparison approach he used six comparable properties. Two Dare care facilities, Two Churches, and two office complexes all of similar characteristics. In his appraisal report he arranged everything and made his adjustments as the subject property compared to the comparables. Then came to his reconciliation point. The final number at what the property is worth is not relevant. The important parts of our conversation were what he was thinking and what his methods were when he appraised this building. Why he made some adjustments here where he did, and what he reasoning was.

The project Mr. Tom Austin took on was not an easy one that any ordinary person could do. It took a skilled and experienced veteran. Because it was an appraisal of a school it made the circumstances different that that of an average office complex. Just because it was used as a school rather then a typical office, made his choices and actions much more complex. As Tom Stated, the Appraisal process is there for a reason, and if you follow it you should come to a reasonable answer.

Blog 2 Real Estate Professional Interview Regarding Real Estate Appraisal and Land Valuation

David Mueller-Flores
FIN 181

For my interview I choose to interview a broker, so that I could gain insight as to how appraisal and land valuation would be a part of my future career. I was fortunate enough to discuss a few questions regarding appraisal and land valuation with Mr. Harlan Anderson. Mr. Anderson is a broker and owner of Realty World Sweeney Anderson located in Hanford, CA. He was very helpful and it was a great opportunity to hear his opinions regarding real estate appraisal. Following will be my questions and his responses.

Q: How often are you asked to give a broker’s opinion of value? And by what sort of client usually?

A: “I am personally asked to do broker opinions of value or broker price opinions probably two or three times a month. I do have agents that work under me, however, that specialize in these and probably do as many as twenty per month; which would be one per day. Who usually asks for these? It’s virtually always the bank that’s holding a first (first trustee) or on occasion somebody that’s holding a second or third trustee may ask for a broker’s price opinion.”

Q: As a broker, would it be beneficial to have an appraiser as a personal contact? Why or Why not?

A: “This question is a little tricky. The industry, or some drama queens out there, seems to think that there is already too tight of a relationship between brokers and appraisers. So that the appraiser feels obligated to bring in a value that really isn’t there. So with the current political correctness in play, it would be very NOT beneficial to have a tight personal relationship with an appraiser.”

Q: Can you think of an example where an appraisal had a significant impact during a property sale or purchase?

A: “Yes, there are lots of times where an appraisal is a very big thing in a contract and to make a contract go through. Many times they find things, conditions of the property that must be corrected as a condition in order to be approved for the loan. That and of course the other thing too, if a buyer and seller have a $140,000 purchase price that has been agreed on and then the appraisal comes in at $125,000. The deal can fall apart, hopefully it can be renegotiated. Many times the seller will be upset but still say, “Ok, well that’s what a professional says it’s worth. That is what I will sell it for.” Even when appraisals do come in lower than the sales price many times the transaction can still go through. But, that is a very big hurdle to jump over if that kind of scenario plays out.”

Q: What Benefits would a brokerage firm expect if they had an on-staff appraiser?

A: “This question scares the bejesus out of me. If we had an on-staff appraiser; right away people would be second guessing us and say, “You made your appraiser bring in that value under threat of cutting them off, firing them, dismissing them, chopping them off at the knees.” There is no way we could consider having an appraiser on staff.”

Q: In your opinion, what effect did appraisals have on the housing crisis?

A: “Appraiser got blamed for things when they brought values in or did not bring values in for a period of time when the housing market was falling off the cliff and really raw. I’ve heard such things as someone looks at a house today that’s worth $160,000 and blames the appraiser at bringing in the value in at $225,000 back six years ago. Yeah, you’d look real bad if your appraisal was that much higher than today’s actual value. But that’s what it was worth at that point. I do not think that the appraisal field and in my experience I saw no appraisers that were bringing in values higher than what they should have been; at any point. I think they are a very honorable profession, as a group.”

I would like to thank Mr. Anderson for his time and insight. He was extremely helpful and willing to share his opinions regarding real estate appraisal. I was honestly surprised at some of the answers he had given but his reasoning and logic makes sense to me and has given me new perspective regarding relationships between brokers and appraisers; as well as, brokerage firms are asked to give their own opinions of value. This was a great experience for me and it was very informative to discuss this topic with Mr. Anderson.

Fresno Association of Realtors 09/23/11

Investor/ Exchanges Meeting
By Erica Mendoza

At the beginning of the Investor/Exchange meeting the first topic of discussion was about Real Estate Agents being more diligent about the protection of the homes they are listing. Some of the suggestions included being proactive by searching there listings on the web and making sure they weren’t listed as rental properties. A problem that they have seen come up is that some how the listings are being placed on websites such as craigslist that are making these homes targets for potential burglaries. Another problem in connection with this includes the lock boxes that are on properties listed on MLS. The problem with the lock boxes is that many agents that are showing homes in a certain area see the boxes and simply stop by and take a look at the property. The problem with this is that there is no call before the showing which doesn’t give property owners the security of who is entering there home. After some quick research from Paul one of the attendees we also discovered that Appraisers do not have to be agents to have an MLS lock box key, all they need to do is pay there dues and register with MLS. This adds another professional that agents need to be aware of since they can have access as well.

Other topics discussed were surrounding rental properties and what you should do as a landlord or suggestions as to how to handle a certain situation. One of which included the discussion of when tenants contacted the landlord about a leaky faucet. Many said they would just send the handy man to go out and fix the problem but, some said they would ask about other potential problems at that time. Mr. Hyatt suggested that they always get a written statement from tenants after each repair. This would protect the landlord from tenants saying later that the landlord never took care of problems presented on the property. Something that I was very surprised to find out was that many landlords didn’t take the extra step of taking a tenant to small claims for damages. When Mr. Hyatt asked how many had taken a tenant to small claims only two of the group of approximately sixteen attendees said they had. Both of which said it was not worth there time and effort. It was better for them to write if off as a business expense then to go through the hassle and file all the appropriate paperwork to not even end up getting the money. A question also asked was about homes that were bought on front steps of the court house. An investor wanted to find out from the group what they would do if they purchased a home from there and found out that the home was not vacant if they would simply go and change the locks. From the discussion it turns out that because of human rights you simply can’t change the locks on the home because you purchased it, in fact you have to go through the proper procedure as a tenant and give them proper 30 day notices.

One of the last topics of discussion was about the low rates that we currently are seeing offered such as a 3.75% fixed for 30 years. Mr. Hyatt spoke about how he’s been in the business for over 40 years and has never seen such low financing available. Along with Affordability rates of 80%. In Mr. Hyatt words, “This is perfect storm to start investing.” A strong point that they brought out various times and that they wanted me to share with the class is that, “Cash is gold, and he who has the gold makes the rules.” What they meant by this was that we have no influence on what the economy does, or what the government changes but we do have an influence on our survival in the future is we keep reserves for that rainy day. Investing in real estate is the toughest today then ever before. But, they do recommend that if we are given the opportunity or have the way of doing so we should invest in what we know and what we know is real estate.

Blog 2

Julie Nolan

Blog Post Assignment 2

Markets and Environments

Eminent Domain

All of us know the gist of what eminent domain means, the government can come in and take your home or land away from you and they end up paying you money in order to do this. However how many of us actually know the real meaning of the words eminent domain? Probably very few of us. The definition according to Merriam Webster Dictionary is a right of a government to take private property for public use by virtue of the superior dominion of the sovereign power over all lands within its jurisdiction.

Many people view this as unfair or just plain old the government using it’s power to hurt others and not think about the people’s feelings. A government however must meet two requirements when they want to exercise the right of eminent domain and that is just compensation, i.e. market value of the property, and also a public use. The government cannot just go and buy land just for the hell of it they have to have a public use for the land already in place that they want to use it for it does not matter what it is just that it has to be taken for the good of the public. I believe that the definition of what eminent domain is suppose to be and what the directions for that land works if that is how the government follows it. There have been cases where the government abuses it’s powers, however when has the government not abused a power it was given. I hate to say it but it happens.

For example, in a case dubbed:

Lucas v. South Carolina Coastal Council, 1992, the Supreme Court ruled that a South Carolina land use regulation deprived a coastal land owner of any possible economic benefit from his land. The land owner wanted to build homes on his land and was not allowed to according to the terms of the land use regulations, which were designed to protect endangered wetlands.

The Court said that preventing Mr. Lucas from gaining any economic benefit from his land had the same effect as "taking" the land, and that, therefore, he was entitled to compensation according to the Eminent Domain Clause.

I believe that this is a prime example of the government doing what is right, yes it had to be brought to their attention in the form of a court room but once it was they paid Mr. Lucas his just compensation just like Eminent Domain says to.

http://www.merriam-webster.com/dictionary/eminent%20domain

http://www.revolutionary-war-and-beyond.com/eminent-domain-cases.html

Chapter 12

Chapter 12
1. One of three valuation techniques taught to real estate appraisers requiring an estimate of the market value of the land combined with an estimate of the reproduction cost new of all improvements adjusted by estimated depreciation is known as
a. Income approach
b. Cost approach
c. Investment approach
d. Sales comparison approach

Answer is D- Sales comparison approach

2. The most common listing or brokerage agency relationship. It grants the broker the right to collect a commission if the property is sold during the listing period no matter who actually brings the buyer to the transaction is known as
A. Exclusive right to sell
B. Exclusive-Agency
C. Net Listing
D. Open Listing

Answer is A. Exclusive right to sell

3. The process of converting an income stream into a lump sum estimate of present value is known as
A. Depreciation
B. Capitalization
C. Confirmation
D. Gross Rent Multiplier

Answer is B- Capitalization

1. An analogous term for the prescriptive appraisal process, that systematic process that appraisers are taught to follow when valuing real estate is known as heuristics.
Answer: False- Known as Normative appraisal process

2. A specific value an income-producing asset has to a particular investor or potential investor is known as anchoring.
Answer: False- known as investment value

3. The problem solving heuristic characterized by giving greatest weight to the most recently encountered evidence for example when considering a series of comparable sales is known as recency.
Answer: True

4. The broker who has entered into an agency agreement to market and sell property on behalf it is owner is known as the selling broker.
Answer: False- Known as listing broker

5. Value in use originates from the worth or utility that a property has for a particular individual who uses it.
Answer: True

Chapter 11 questions

Chapter 11

1. The assessor-determined value used to calculate property taxes is known as
A. Value in use
B. Value in exchange
C. Assessed value
D. Ad valorem value
Answer is C- Assessed Value

2. A use that was established before and does not meet current zoning requirements but is legally allowed to continue is known as a
A. Homestead exemption
B. Grandfathered use
C. Exemption
D. Conformity
Answer is B-Grandfathered use

3. The creation of geographic areas, or zones, of similar land uses and density of land use is known as
A. Zoning variance
B. Subdivision regulation
C. Zoning
D. Comprehensive Plan
Answer is C- Zoning

1. A common assessed value deduction to permanent residents who use their property as their primary residence or homestead is known as special assessment.
Answer- False- Known as homestead exemption

2. Mass valuation is a technique in which the private property owner’s rights to ask for a change in assessed value, usually because the property owner thinks that the current assessment is too high.
Answer: False- This is the definition of Assessment appeal

3. The act of a developer yielding ownership of land and improvements to a local municipality is known as a dedication.
Answer: True

4. The total amount of taxable property value of all taxable real estate within the county is known as the legal nonconforming use.
Answer- False- Known as Tax digest

5. The building envelope is a minimum required construction standard used to protect the health and safety of the public.
Answer: False- Known as the building code.

Chapter 10 questions

Chapter 10
1. A variable rate or payment mortgage that adjust to a specified index periodically is known as
A. Acceleration clause
B. Adjustable rate mortgage
C. Amortization
D. Annuity

Answer is B- Adjustable Rate Mortgage

2. A document transferring legal title to a trustee is known as
A. Deed of reconveyance
B. Equitable title
C. Deed of trust
D. Title theory

Answer is C- Deed of trust

3. A personal promise to bay back a loan is known as
A. Secured debt
B. Unsecured debt
C. Lien theory
D. Hypothecation

Answer is B-Unsecured Debt

1. A mortgage product that acts like a standard constant payment mortgage for a specified number of years and then turns into an ARM product thereafter is known as a hybrid mortgage.
Answer-True

2. The initial low rate offered by mortgagee as enticement, or tease for a mortgagor is known as a fixed rate.

Answer: False- Known as Teaser rate

3. A fee that the mortgagor agrees to pay, in addition to the outstanding mortgage balance, when a loan is prepaid and the mortgage does not have a prepayment clause is known as a point.

Answer: False- Known as a prepayment penalty

4. The risk that interest rates will change and negatively affect the interest rate spread is known as the lenders effective yield.

Answer: False- Known as interest rate risk.

5. A ceiling of the interest rate change over the life of the mortgage is known as an overall cap.

Answer: True

Ch 12

Yadire Mendoza

Ch. 12

1. The two broad concepts of real estate are value in use and value in purchase. F-value in use and value in exchange. Pg.366

2. There are two kinds of appraisers, commercial and residential. T-pg.367

3. According to many appraisers two types of human constructions are found on sites: improvements on the land and improvements to the land. T-pg.371

4. The income approach technique requires an estimate of the market value of the land. F- cost approach pg.372

5. In the cost approach technique depreciation is deducted from the estimate of value. T-pg.373

6. The prescriptive appraisal process that directs appraisers to thorough, systematic approach is called:

a. Normative –pg.385

b. Heuristics

c. Regency

d. None of the above

7. When appraisers are appraising in a market area familiar to them they tend to not do which of the following:

a. Conform

b. Anchor –pg.387

c. Administer

d. All of the above

8. Which of the following are the roles that attorneys play to optimize their clients interest:

a. Technician, negotiator, adviser, and counselor pg.393-395

b. Counselor, adviser, teacher, protector

c. Adviser, psychiatrist, teacher, negotiator

d. None of the above

C hapter 12

1. Gantt Charts are?

a. A value in use concept
b. Subconscious mental short cuts
c. A project management technique used to schedule work
d. Exists when the same broker represents the buyer and the seller

2. The process of turning an income stream into a lump sum estimate of present value is called

a. Capitalization
b. Depreciation
c. Gross rent multiplier
d. Dual agency

3. The valuation technique that looks the cost to build a similar structure on a similar piece of land is called.

a. Sales comparison approach
b. Income approach
c. Cost approach
d. None of the above

4. T/F The sales comparison approach looks at recent sales of similar properties to determine value.

5. T/F The Cost approach looks at how much it would cost to recreate a piece of property

6. T/F Is a heuristic theory

7. T/F A listing broker always brings a buyer into a transaction

8. T/F Overall cap rates are commonly used to estimate the investment value and market value of income producing real estate

1)A, 2)A, 3)C, 4)T, 5)T, 6)T, 7)F, 8)T

Chapter 11

1. Which of the following are examples of zoning codes

a. A
b. R2
c. S
d. All of the above

2. A building envelope is

a. A special exception to a specific zoning requirement
b. An exception to current land use regulations
c. The area on a site that may be legally built upon
d. An envelope built out of construction paper

3. The act of a developer yielding ownership of land and improvements to a local municipality is called

a. Dedication
b. Impact fee
c. Grandfathered use
d.Zoning variance

4. T/F A comprehensive plan is an overall documented long term guide for a community or regions future development and growth

5. T/F A mill is 1/1000

6. T/F Ad valorem value refers to a properties market value

7. T/F Tax digest refers a condition where people loose their appetite after they see their tax bill

8. T/F The Government is a partner in real estate ownership.

1)D, 2)C, 3)a, 4)T 5)T, 6)T, 7)F 8)T

Chapter 10

1. An overall cap is?

a. A Limit on the amount of money you can borrow
b. A ceiling on the interest rate change over the life of a mortgage.
c. The appropriate type of hat to wear with overalls
d. Both a and c

2. Which of the following is a situation in which a higher underwriting ratio would be justified?

a. Applicant has good future earnings potential
b. Applicant is paying a large down payment
c. Applicant has a good track record
d. All of the above

3. Which of the following should you bring with you to a meeting with a mortgage originator?

a. Three months of pay stubs
b. A resume and good appearance
c. Socket wrenches
d. Both a and b

4. T/F Prequalification is a firm commitment by a lender to give you a mortgage

5. T/F A penalty occurs if you do not pay off your mortgage early

6. T/F A motrgage point equals one percent of the loan amount

7. T/F With an ARM if interest rates rise your mortgage can end up costing you an arm and a leg.

8. T/F A hybrid mortgage starts off as an ARM and ends up like a regular mortgage

1)b, 2)d, 3)d, 4)F, 5)F, 6)T, 7)T, 8)F

Ch 11

Yadire Mendoza

Ch.11

1. Zoning is one of the least powerful rights a municipality has to implement the comprehensive plan. F-most powerful pg.349

2. The property tax calculation consists of 7 steps. F-5 steps pg.345

3. Tax exempt properties are banks, insurance companies, and title companies. F-government owned building, churches pg.344

4. A preliminary plat approval is a part of a procedure in a subdivision application and approval process. T-pg.357

5. Building codes are required construction standards that vary according across the country. T-pg.356

6. The subdivision application and approval process follows which of the following procedure:

a. Information application conference, preliminary plat approval, final plat approval pg.357

b. Construction, preliminary plat approval, final plat recorded

c. Both a and b

d. Neither

7. The acronym FAR stands for which of the following:

a. Floor and roof

b. Floor-area ratio pg.351

c. Front and rear

d. None of the above

8. A building envelope is recognized by:

a. Reducing a required amount from the front, rear, and side property lines pg.352

b. Reducing a required amount from the corners of the property lines

c. Both a and b

d. None of the above

Chapter 12

Kasper Hovannisian

Chapter 12

1. The subconscious mental shortcuts employed by human problem solvers needing to minimize cognitive effort is;

A. Heuristics

B. Normative Process

C. Recency

D. Anchoring

2. The broker who brings the buyer to the transaction is;

A. Listing Broker

B. Agent

C. Buyers Broker

D. Selling Broker

3. The most common listing or brokerage agency relationship is;

A. Special Agency

B. Exclusive agency

C. Exclusive Right to Sell

D. Dual Agency

4. A buyers broker represents the buyer in an agent principal fiduciary capacity.

T/F

5. The broker who enters into an agency agreement to sell property on behalf of its owner is the listing broker.

T/F

6. The least likely transaction price for a property is the market value.

T/F The market value is the most likely transaction price

7. The process of converting an income stream into a lump sum estimate of present value is called capitalization.

T/F

8. Value in use and value in exchange are not two of the concepts considered by appraisers.

T/F They are the two concepts considered by appraisers.

Chapter 11

Kasper Hovannisian

Chapter 11

1. The total amount of taxable property value of all taxable real estate within the county is;

A. Tax Assessor

B. Sales Tax

C. Property Tax

D. Tax Digest

2. The estimate of a property's market value for taxation purposes

A. Ad valorem value

B. Mass Valuation

C. Assessment Appeal

D. Tax Assessor

3. The creation of geographic areas of similar land uses and density of land is;

A. Zoning

B. Comprehensive Plan

C. Conformity

D. Area

4. A mill equals 1 per 1,000.

T/F

5. The assessor determined value used to calculate property taxes is the assessed value.

T/ F

6. A church is a tax exempt property.

T/F

7. The assessed value after all applicable exemptions is the assessment ratio.

T/F This is known as the taxable value

8. The person responsible for calculating the tax digest is the tax assessor.

T/F

Chapter 10

Kasper Hovannisian

Chapter 10

1. A personal promise to pay back a loan is;

A) Secured debt

B) Collateral

C) Unsecured debt

D) Payment clause

2. A states view that a mortgage is simply a lien on real property

A) Lien theory

B) deed of trust

C) Title theory

D) Amortization

3. A document transferring legal title to a trustee is;

A) Deed of reconveyance

B) Deed of trust

C) Title theory

D) Amortization

4. A mortgage originator is a specialist who focuses on loan organization.

T/F

5. The gradual reduction of a debt through systematic principal repayments over the life of the loan is called debt service.

T/F This definition describes amortization

6. The pledge of property to back up a promise to pay is called collateral.

T/F

7. A reference to a mortgage is the promissory note clause creating a link to the mortgage and the collateral.

T/F

8. A personal promise to repay the loan backed up with collateral is unsecured debt.

T/F This is known as secured debt.

Reminder - Final Exam

Don't forget.  You may take the final exam on Monday at 2 PM in room 191 PB (UBC) or Wednesday at 3:30 PM in our classroom.

If you are re-taking the Investment Problem section from Exam 3 you must bring and turn in Exam 3 to me before you retake the Investment Problem.  You may use an index card for the Investment Problem only.  The Investment Problem re-take is not a requirement.

As announced in-class, the final exam will cover chapters 10, 11, and 12.

Chapter 12 Mutliple Choice & True/False Questions

Multiple Choice

1) What method is taught but not used often by appraisers?

a)Capitalization

b)Value in use

c)Descriptive appraisal process

d)Prescriptive appraisal process

2) What method isn't taught to appraisers, but is the one most often used by them?

a)Descriptive appraisal process

b)Value in exchange

c)Prescriptive appraisal process

d)Normative process

3) How many steps are involved in the prescriptive appraisal process?

a)5

b)8

c)7

d)4.75

True/False

1) An agency that exist when a broker represents both the buyer and the seller in the same transaction is known as a dual agency. T/F

2) The process of converting an income stream into a lump sum estimate of present value is known as the descriptive appraisal process. T/F

3) The normative process is a systematic process appraisers are taught to follow when valuing real estate. T/F

4) The listing broker is the broker who brings the buyer to the transaction. T/F

5) The special agency empowers agents to act on behalf of their principal in a transaction. T/F

Answers

1)d

2)a

3)b

1)T

2)F - Capitalization

3)T

4)F - Selling broker
5)T

Chapter 11 Mutliple Choice & True/False Questions

Multiple Choice

1) A technique used by assessor's to create ad valorem assessments on a large umber of properties is known as

a) Tax digest

b) Mass valuation

c) Ad valorem value

d) Assessment ratio

2) Which of these is false?

a) Property tax due = Taxable value x Millage rate

b) Effective tax rate = Property tax due / Ad valorem value

c) Assessed value = Ad valorem value x Assessment ratio

d) Taxable value = Assessed value - Millage rate

3) A common assessed value deduction to permanent residents who use their property as their primary residence is known as what?

a) Exemption

b) Assessed value

c) Assessment ratio

d) Homestead exemption

True/False

1) The ratio of assessed value to the ad valorem market value estimate is known as the assessment ratio. T/F

2) The assessment office's numbering system to uniquely identify each parcel in the taxation district is known as the tax digest. T/F

3) The assessor's estimate of a property's market value for taxation purposes is known as the ad valorem value. T/F

4) The assessed value after all applicable exemptions is known as the mass valuation. T/F

5) A rate of 1 per 1,000 is known as the millage rate. T/F

Answers

1)b

2)d

3)d

1)T

2)F - Assessor's parcel number

3)T

4)F - Taxable value

5)T

What it Takes to Invest in Real Estate

by: Mohammad Aljehani

Real estate industry is one of the oldest industries on the planet. People have been using real estate since the beginning of the human being and will still use it forever. It has an infinite use and value. Real estate will always worth something. It is a gift for the people to use in the best ways. There will always be a market for real estate even if people reached to another planet to live in. Therefore, investing in real estate is considered one of a lot of people’s concern because of the benefits this field provide for its owner. More details will show the significance of real estate, how to start investing in a real estate business and what plan should you have? And what critical decision should you take when investing in real estate with leverage.
Real estate is so important because of different reasons. It has a big value since the earlier ages because of the shelter and privacy it provides. As more population increases, people started putting boundaries and distinguishing who owns what. Beside the shelter it provides, people actually can make money out of it. Owning a piece of land is almost everyone’s dream. even though due to economy break down nowadays, still owning your own land is more valuable than anything else for the reason that you can stay under your private roof when you have no place to go to and you can trade it for a good amount of money whenever you feel it is a good time to put it in market. Because real estate is such a highly demanded product, investing in it would be a direction for a lot of entrepreneurs out there.
Before investing in real estate everyone should consider a plan before beginning on a project or an investment in order to have an organization of steps on how to complete the goals you acquire. Part of the plan you must consider is to see what you want to invest on and how. Also the local economy in where you want to invest in. You want to make sure that people in the area are actually buying, the amount of population that moves around there, are businesses succeeding or closing? And whether or not there are people working around that area. It is best to investigate the best place to find out about the economy of a certain area that you are interested in. Maybe consider looking at websites, magazines, newspapers, or take some ideas from certain books to fulfill your mind with certain or several ideas, as a fresh start. Later after being and feeling prepared to move on to the next step, meet people and some investors around there, places and attend to certain events if there are any. Have the eyes of a Real Estate Investor because this is what will train your mind to move forward and view what is successful and what is not.
The third step to consider is looking at the money in your pocket. Now in this economy it is not the best time to be making loans so it is best to start off with a good amount of money to have a better start up fund to adjust you for a while just in case there are issues that need to be addressed with the property, or delays in selling or renting a property. Before you even putting your money down on the table it is important to start off with an offer. Making no offers leaves you with nothing but wishing and hoping bad overall strategies for success in anything. You have to create a good dynamic of work when it comes to this , makings offers builds more confidence, makes you open up to new offers and can even be accepted. No matter what you know the deal will close so it is best to put in effort in what you want. As for the last step, finish what you have begun. Decide ahead of time you will finish what you start and close on every deal you make an offer on. Real estate will always bring deals that are not granted at how you want them, so you must sustain to being positive and bringing the closest deal you want to a close at your offer or closet offer. In the end you will be left with what you have invested on.
Due to a lack of cash flow, you will consider borrowing, but you should calculate the risk that would result from a decision you are about to take. Now a loan on secured by real estate collateral is known as a mortgage. Which is known to be popular but sometimes not the best option, real estate investments provide an opportunity to generate cash flow. Apart from commercial banks, savings banks, savings and loan associations, credit unions, real estate investment loans can also be obtained from insurance companies, mortgage bankers, mortgage trusts and so on. As we all know there are two types of mortgages residential and commercial loans. If one is to decide on a loan you must be careful before you proceed on what you have in mind because loans are a risky thing if you don’t succeed in you plan. Many investors have had financial trouble by looking at past and recent history and also for relying on the future to produce the same results. First point to consider is that once a business starts you must focus closely on the percentage rate for the number of years. If percentages are from 15% to 30% you are looking at a risky proposition that maybe leading to loss or something worse. Second point, you must avoid ending up with a high payment to avoid credit losses or higher than expected vacancy. Third point; do not let good financing lead to a bad investment. Avoid behaviors sticking in your mind, if the property is overpriced let it go, and move on to something more of your average price to avoid drag and loss of property. And last point; always remember that cash flow is what will bring you and your investment up if you work on it correctly. If your income and your mortgage costs and expenses are putting a nice cash return in your pocket every month, keep the work up and success will be right at your front door.
In conclusion, beside all the planning and calculations an investor would put in, an important element that lead to an action is the investor’s gut. That does not mean it is a typical gambling game because real estate business still need studies and data to work with before making a decision along with your guts. It is a risky business but it worth the risk taken at the end.

Kimmons, James. "Real Estate Leverage - Top Risks of Real Estate Leverage." Real Estate Business Guide. Web. 8 May 2011. .
Dunn, Tom. "Beginning Real Estate Investing - How Do I Start to Invest in Real Estate?" Real Estate Investor Stories- DealFiles! Web. 8 May 2011. .