How Can You Prepare for Your Next Home Purchase?

Before you begin your home search, it’s critical that you take some steps to prepare. Today, I’ve got six things for you to think about.

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Today, I’d like to share a list of six things to think about when preparing to purchase a home. 

1. Check your credit. If you don’t already know your credit score, you definitely want to pull your report. Two options I recommend are www.annualcreditreport.com and Credit Karma. If you have some time before you buy, focus some energy on improving your score. No matter where your score is now, a better score will almost always help you get a better rate.

2. Don’t open up new accounts. Your credit history is based on how long you’ve had your credit, how often you pay, and whether you pay on time. The last thing you want to do before buying a home is open up a new line of credit.

3. Using gifted money toward your home purchase. Around the holidays, consider asking for financial gifts instead of material items. A little extra cash could go toward your down payment, and help you transition more smoothly into your new home.

Knowing what you can actually afford before you start looking will save you a lot of trouble.

4. Keep an eye on interest rates. Even a slight increase in interest rates will decrease your buying power, so being aware of current rates before you purchase a home will give you an advantage.

5. Get a lender. If you don’t already have a lender, I would be happy to give you some referrals.

6. Get pre-approved. Knowing what you can actually afford before you start looking will save you a lot of trouble. Once you provide some documents to your lender, they will be able to get you pre-approved so that you can start your home search.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

Airbnb Properties vs. Long-Term Rental Properties

Should you invest in an Airbnb property or would a long-term rental be better for your real estate goals? I’ll go over a few pros and cons for you to consider today.

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If you haven’t used Airbnb yet, it’s a great experience. I’ve booked a 5-bedroom, 5-bathroom house in Rome for 10 of us to go on a Mediterranean cruise. We got the kitchen and a great location to see the city.

You can rent an Airbnb for $200 to $500 a day, which has many investors purchasing short-term rental properties. However, what are the pros and cons of investing in an Airbnb property? How do these properties compare to long-term rentals?

Investing in an Airbnb property is a great way to bring in a larger cash flow each month, but there are a few things you need to be cautious of.

First of all, pay attention to the location of the property. Is the property in a homeowners association or association complex? Some HOAs have rules in place that do not allow a rental for less than 30 days, so make sure you will be able to have a short-term rental before you purchase a property.

You should also check the zoning. Certain cities do not allow any type of short-term rentals except in certain zoning areas so that the city can establish a tax base and collect taxes for short-term rentals.

When you invest in a long-term rental, you typically buy a single-family home that will bring in $1,500 month. With Airbnb, you can bring in $200 to $500 a day, which could net you $9,000 a month.

With an Airbnb property, you could net as much as $9,000 a month.

You should also pay attention to commission. On a long-term rental, you’ll pay about 10% per month on the income you get from the property to a property management company. The property management company will take care of maintenance, cleaning, and day-to-day issues.

Airbnb commissions are more complex. People can check in on a daily or weekly basis, and the commission rate is closer to 50%. Make sure you get an agreement with a property management company that is fair for both sides.

Finally, what happens after you get tired of running an Airbnb? What is your exit strategy? That home needs to be in a good, rentable area so that you can transition the property into a long-term rental.

Your other option is to sell the property, so make sure you purchase in an area where you will be able to get all of the money you invested in the property back when it comes time to sell again.

If you have any additional questions about short-term or long-term property investments, just give me a call or send me an email. I would be happy to help you!

Renovations Loans, Explained

With a renovation loan, you can add renovation projects on a home you buy to the actual mortgage. Watch this video to learn more about them.

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Today I’m joined by a special guest: Barry Krevoy, who is our LoanDepot representative.

We had a situation that came up this last weekend. My buyers are looking for that perfect home that’s turnkey and ready to go. When I talked to Barry about this, he found that they’re well-qualified to get the loan, but he was suggesting that maybe we look into a renovation loan.

So today, Barry will be talking about renovation loans—the different types, and how they all work.

A renovation loan is just like any other loan, except for the fact that we’ll be adding renovation projects on the home to your actual mortgage. There are two different types: a full renovation loan, which you can do a conventional FHA loan on, and a VA renovation loan, which is a streamline loan.

There are also FHA and conventional streamlines. Streamlines are non-structural, so you can put in new countertops, new carpet, new appliances, and so on. No permits are required for this, since it’s not for construction projects.

It really opens up a lot of options, and takes a house that needed love and turns it into the house of your dreams.

Then there are full-rental loans, where you can add bedrooms, floors, and other larger projects. We have a lot of people that are getting priced out because everybody wants a single-family residence with 2,000 square feet. There might be properties out there where you can add a bedroom, bathroom, or maybe a second story. It really opens up a lot of options, and takes a house that needed love and turns it into the house of your dreams.

In flipping shows like the ones you see on HGTV, they don’t buy a home and flip it using money they have laying around; they use renovation loans to finance it.

As far as benefits go for regular buyers, the interest rates will be a little bit higher because you’re packing more into the loan. On a full renovation loan, you can put six months' worth of payments into the loans, so you don’t even have to make a payment on the house for six months.

Another great fact is that you can use the renovation loan to flip a house, and you only have to put 15% down. We all know on an investment property, you usually have to put 25% down, so there really are a lot of benefits.

If you’re interested in a renovation loan, I suggest you give me or Kevin a call, text, or email. Let’s see whether or not it works for you.