Category: Property & Mortgage

Choosing a Commercial Property

Commercial property

When you are investing for the purposes of capital growth, there are certain kinds of retail, commercial or industrial properties that can be a very superior option. It is important to know that not all kinds of properties will perform the same. There will always be differences.

When you start to analyze the great potential of a physical property, location and position need to be considered and should actually be the key elements in the process of making a decision. In property, the capital growth of an asset comes from the increase of the land value and the location influences the demand and supply for the land and this then determines the value. A good example is a central business district where the value of land is very high and this actually drives the capital growth.

When the land value goes up, then the value of all the improvements or even the building itself will depreciate with time. This means that the land appreciation should be sufficient enough to counter the building depreciation and also to grow the asset value with time.

Position means how easy it is to access the property. You should ensure that the location matches with the kind of business that you are planning to operate in the area or premises. A good example is a distribution center that needs to receive shipping on a regular basis and needs to dispatch as well. It should have a great space and road access that isn’t hindered. This may be a good match for a city fringe or a place that is near to the port. Arterial roads make it even easier to access.

Lease

It doesn’t really matter if you are looking for a capital growth or for rent return. The leasing strategy is very important to the performance of the assets in the long run. A leasing strategy should allow regular reviews on rent so as to be competitive and viable at all times. This should include things like the provision for maintenance of the property as well as fit outs that will make sure that improvements are kept at a standard that is suitable.

The layout and size of the premises

This is a very important consideration. You should find premises that can actually handle your kind of business in a very efficient manner. You need to consider the structure and its appearance both externally and internally. Consider the height of ceilings depending on what activities you plan to carry out and all the facilities that visitors and employees will be able to enjoy.

Reverse Mortgage

The eligibility qualifications for the HECM are very simple. The homeowner must be at least 62 years old and have an acceptable equity position in their primary residence. The primary residence includes any FHA approved property: single family residence, multi-family 2 to 4 unit dwelling (one unit occupied by home owner), HUD approved condominiums, or manufactured homes. There are no income or credit requirements for this mortgage program. Eligible homeowners must also complete counseling with a HUD approved and accredited reverse mortgage counselor. The counselor would review all aspects of the reverse mortgage program and how this mortgage type will specifically help the homeowner(s) based on their equity position. The mortgage typically does not have to be repaid until the last surviving homeowner moves out of the property. If the homeowner does not maintain the property as their primary residence for a 12 month period, the mortgage will be due.

The maximum mortgaged amount is calculated from the appraised value of the property, homeowner(s) age (youngest homeowner), interest rate (fixed or variable), equity position, and FHA lending limit for the county the home is located in. These factors will determine how much equity is available to the homeowner(s) to receive in a lump sum, equal monthly payments for as long as the homeowner lives in the home, line of credit, or monthly payments over a set period of time.

Homeowners retain ownership of their property and are not required to make any monthly payments. Even if the value of the home decreases, the homeowner is not held liable because a reverse mortgage has a non-recourse provision. This means that HUD and the lender share the risk on the future value of the house, not the homeowner. Although, HUD does require the home to be maintained in acceptable condition to retain its value.

Hiring A Mortgage Broker

Mortgage is one of the things that must not be done with DIY tips. Even with the fact that its inherent conditions are not that complicated, most especially for the eager to learn and those who are financially savvy, there are a lot of beneficial inside details regarding mortgages that are not just accessible to anyone who is not a member of the industry.

Reasons For Getting The Services Of A Broker

  • This professional can streamline the process – It will be a lot easier for you to make the best decision when it comes to protecting as well as managing your finances. You can rely on them since they can be able to suggest the best mortgage that suits you. Also, they can design a personalized program that will consider your other financial accountabilities so that mortgage payments will be less burdensome, and will provide you with loads of excellent mortgage advice.
  • Access to inside info regarding the mortgage industry – You can always be updated regarding the possible changes that will directly affect you like new mortgage criteria or policies that will be implemented in your community. With the help of a professional mortgage broker, you will be able to get this important information. Most homeowners say that the main benefit here is that it will allow you to make efficient preparations in order to accommodate or perhaps comply with these changes.
  • Simplify the process of mortgage applications – These professionals will easily take care of this process for you. With their experience and connections within the industry, you will be led to lenders who will process your application faster and easier. Thus, you can begin on payments right away as well as work on the completion of such particular financial responsibility a lot faster.

Buy Overseas Property Safely

Hire an independent lawyer

Many people seek the help of real estate agents, which is not a very good start. No matter how smart, experienced, informative and well-mannered an agent tends to be, never fall for it. Always get an independent lawyer, who will represent you throughout the whole buying process. If you are represented by the lawyer, it means you are well-protected from making any expensive mistakes down the road.

Get help from a financial specialist

Sort out your financial preferences that would help you allot a suitable budget to purchase the property. Get a provisional mortgage if you have plans to borrow money apart from what you plan to pay from your pocket. Ask your financial specialist to suggest a long term repayment plan that would be feasible for you as the lending criteria and the borrowing costs may change during those years.

Hire a foreign exchange specialist

If you borrow money overseas, but earn at home, you have to make sure that the rate fluctuations would not affect the value of your property. The difference in the value of currencies could take the property out of your hands as it goes beyond your budget. Discuss with a foreign exchange specialist and understand your risks and have a proper contingency plan to handle unpleasant situations.

Double-check the agent credentials

Apart from hiring an independent lawyer, choose a professional overseas real estate agent to assist you through the process. Place your focus on the agency rather than the property you want to buy. Question them in all possible ways to make sure the company or the agent is potentially the right person to do business. No matter what they claim, make sure everything is true, to the last bit. Don’t trust reel reviews, read real client testimonials. Ask them to offer their “Terms of business” on paper prior to signing a formal contract with them.

Learn to get the most out of your investment

When you purchase a property overseas as an investment, you must understand that you can have big returns only with risks. Make a thorough inventory of the risk to reward ratio to help you cope up with the risks and to reap better rewards out of your investment when everything goes well.

Mortgages For First Timers

Buying the first home is not just a very exciting experience but it is undoubtedly the most challenging experience. Now, what is the biggest challenge when you are planning to buy your first house? It is choosing the right mortgage for yourself. Well, there are so many mortgages available in the market. These days the lenders have all the specifications mentioned in their offers and so there is hardly anything that you will not know before you make the decision to choose the best mortgage for yourself. Yes, you will have to do some comparisons before coming to a conclusion. One thing that you must never let skip out of your mind is the practical financial target that you have in mind. All the lenders will do the calculation based on your income, your expenses, your savings, your records, the current interest rates and the possible fluctuations of the rates in the future. Of course, these factors are taken into account roughly.

Be informed that 100% mortgages are not available these days. So that means, you will have to make an initial deposit of the total mortgage amount decided and the remaining amount will be financed by the lender. A bigger initial deposit will fetch you more benefits.

There are different types of mortgages but broadly they are categorized as Variable Rate Mortgage and Fixed Rate Mortgage. You will have to choose between the two and one thing that should be clear in your mind before you make the choice is the time span for which you want to keep the mortgage. The main reason that you have to be mindful about the time span is because early surrendering or repayment of the mortgage amount will let you be penalized by the lender.

Finding a Residential Property

Your first job is gathering information about property management companies operating in the area you are looking to invest in. Remember, that this field is filled with frauds; so, before picking the property management company, never forget to perform detailed research. Opt for a company that enjoys great reputation. A great way of knowing what people think about the firm is checking the Internet. You can also seek suggestions from your friends and relatives when it comes to picking the management firm.

The next step should be talking to the bank. Of course, you will not need to do this if you have enough money ready to invest and if you don’t want to take a bank loan. However, for people who need a bank loan to invest, this step is extremely important. The bank will inform you about the maximum amount you can get as a loan. This will make your search for a property easier as you will know your financial capacity. The technical term used for this step is getting pre-qualified.

The third step is possibly the most important one. In this step, you will need to decide on the location you want the property to be in. Perform a thorough research to gather information on areas that have experienced maximum growth in the past ten years. If the property management company you are working with is a reputable firm, they will do this research on your behalf. Keep in mind that properties located in educational and commercial hubs of the country are the most lucrative ones. Ideally, you money should be invested on a land, home, or apartment located close to the market, school, college and last, but not least the highway.

It’s true that the management firm hired by you will ensure you get the property for the best price, but we would advise you to be ready for bargaining. However, never overdo things when bargaining. This is because when you will try to sell the property after one or two decades, the additional money spent by you when purchasing the property will not matter much.

Purchasing Industrial Property

Return

Residential property investment is actually relatively low risk and as a result, low return. Commercial property includes a higher return but this comes in a higher risk. For instance, a flat or device will average a come back of 5% whereas commercial property, such as the warehouse, may average 8%.

Danger

The higher risk comes as higher vacancy rates. Let’s make use of the warehouse example. It could take a while to locate a new tenant for the actual warehouse, many months and possibly greater than a year. Conversely, finding a brand new tenant for your residential property will require generally a week or even two.

Duration of rents

Residential leases tend to become for six or 12 several weeks. However, commercial property leases are usually for a much longer time period. It is not uncommon to possess leases that are to have an initial five-year period, using the option to renew with regard to another five years, after which another.

Quality of renter

The tenant is obviously an important part of your home investment. In commercial home, a government or large corporate tenant is recognized as a ‘blue chip’ renter. They are likely in order to rent your property for a long time of time and tend to be unlikely to default about the rent.

Economic performance

As with any form of home investment, the economy is essential to your financial wellness. At the moment along with consumer and business self-confidence at all-time lows, there are lots of businesses that have in order to close. If your building has one of these simple businesses as a single tenant, you could face some very difficult times. On the additional hand, residential property is fairly resilient with regards to the economy. The worst that can happen is that it takes an additional week or two to locate a tenant or you might have to drop your asking lease by $5 or $10 each week.

High cost of admittance

Buying commercial property is usually much more expensive compared to buying residential property. CBD office or retail space is usually the most expensive room, due to its surrounding area. Industrial property on the actual outskirts of the locality may also be expensive due to size from the property being purchased. Expenses, however, can be reduced by purchasing smaller strata name premises.

Maintenance costs

Improving a residential property is actually relatively cheap. A fresh paint job, new floor covers, kitchen and bathroom can cost less than $20, 000. Refurbishing the commercial building, however, could be a very costly exercise. Brand new air-conditioning, upgrading the building to meet new safety and health standards and refits may cost tens and sometimes thousands and thousands of dollars. However, the expense are rarely borne through the owner.

Outgoings

One of the benefits of being an owner associated with commercial property is how the tenant usually pays the majority of the outgoings, such as local authority or council rates, insurance, repairs as well as maintenance. This means that the majority of the rent collected by the owner has the capacity to be kept unlike the problem with residential property in which the owner uses the rent money to cover rates, taxes, maintenance as well as repairs.

All the information on who pays the expenses, how much rent is actually owed, how often it’s increased is all outlined within the lease.

The lease

This is actually the most important document with regards to commercial property. Unlike a residential lease that is commonly a standard record and about four webpages long, commercial leases in many cases are 50 to 60 pages long, are not standard documents and generally require a solicitor to draw all of them up. Read the lease carefully and if you’re unsure of anything, ask a lawyer to explain it for you.

Ensure the Future of Your Property

  • Buy at a cheaper rate – It is said that one makes more money when he/she buys than when he/she sells. But buying at a cheaper price is a great way to curtail risk. Well, the reason behind this is very simple. You invest less capital, gather fewer liabilities, and you set yourself in a position to grab a higher yield as compared to the purchase price. This stands true for property investment too.
  • Ensure an updated will – You should have an updated will. This is to ensure that your assets are distributed as per your wish. This gives you great piece of mind and there is crystal clear clarity in terms of who gets what from your property.
  • Get income protection insurance – If you are a property investor who is contractually employed or are self-employed, your income does not enjoy the same stability as that of a permanent employee. One great way to ensure the stability of your income is to take out income protection insurance. This makes it possible to receive a certain income if you are unable to work due to any reasons. This might be possible in some countries, but wherever possible, it should be done.
  • Use property management services – There is no such thing as: one size fits all, when it comes to effective property management. Join hands with a good company that provides property management services. They will understand your property and your unique situation to unleash the true potential of your property in future.
  • Be an alert landlord – We have heard many stories of how tenants have misused the property they have rented. To avoid this in your case, take a proper deposit before you give out your property on rent. Make a registered lease agreement with all conditions mentioned clearly. Always be on a look out of any news regarding any tampering with your property and take immediate actions. Once the lease agreement expires, make a new one immediately without any delay.
  • Always keep a buffer – The best way to ensure that you can get cash quickly when you need is to have some cash on standby. Cash is a liquid asset and a ready source of supply is one of the best risk management strategies.

Mortgage Rate Forecasts

One thing that consumers are very keen on paying attention to is mortgage rates. Recent research has indicated that a consumer will begin researching rates months before they finally pull the trigger and decide on a loan. If you are looking at buying a home in the near future, or you are just someone who likes to stay on top of the trends, you should pay close attention. Below, we will go over some predictions and projections from a few expert sources.

Freddie Mac is, in short, a federally backed company that deals in the purchases and sales of mortgage securities. Since 1971, Freddie Mac has released a weekly report of lending trends. Recently, the interest rates on 30-year loans were at 4.53 percent according to this publication. This figure continued to drop significantly to an impressive 4.1 percent interest. While the current numbers look good for potential homebuyers, Freddie Mac is projecting these figures to climb back up to 5 percent as time continues to pass. It is important to note that the increase in rates is just a projection based on observable market trends. Also important to keep in mind is that the increase in mortgage rates will occur over time and not all at once.

Unrelated to Freddie Mac is the Mortgage Bankers Association, which has also made projections for the coming future similar to those made by Freddie Mac. They also predict interest rates gradually rising to a 5 percent plateau.

An esteemed economist, Dr. Bill Conerly, projects an even sharper increase in rates for the foreseeable future. His forecast has this figure topping out around the 6 percent range. But, Dr. Conerly is not overly concerned about this rise, and he doesn’t believe the public should be either.

The Home Buying Institute, however, does not see these figures getting much higher than they already are. They claim that some of the more dire predictions are focused on the state of the Federal Reserve. As you should know, the Federal Reserve is winding down and eventually completely stopping their economic stimulus incentives. These stimulus incentives were put in place amidst a severe economic crisis in 2008, and the fact that the Reserve is finally comfortable easing out of the programs speaks volumes to Dr. Conerly’s assertion that the economy is getting stronger.

Making an Offer on Commercial Property

The first tip we have for you is to determine what your needs will be. You may want to create a checklist of those needs you deem to be essential. These needs include how much space you will need, how much parking space you will need, and will you need a lot of storage space. Perhaps the most essential need will be for a prime location near major highways and/or public transportation. There will be somethings you think you need but that you really can do without. Maybe once you have met your essential needs, you can also consider some of these. However, keep these on the back burner for budgetary reasons.

That brings us to our next tip; your budget. Every business typically has a budget; especially when it comes to a major expense such as moving. You will want to know what you can expect to spend on your new property. Also will you be renting it or buying it? Those are major factors in negotiating your commercial property deal. You also ought to compare the costs of the different properties you are looking at and how they stack up against each other. You are going to want to do some studying on this subject.

One crucial tip we have for you is to know what the laws and regulations are that govern where you will have this property. For example there are neighborhoods that permit commercial properties in largely residential areas. However, the majority of neighborhoods either feature one or the other. This is especially important to know if you are downsizing your office and looking to run your business out of your home. Even if you are looking for a commercial building; it is still important to know if any local ordinances will affect your business BEFORE you sign a lease or buy the property. It might also be wise to seek the advice of a local real estate attorney on this matter. Better safe than sorry.

One last tip we will leave you with is to know what you are doing. Do your homework before you even begin to look at making an offer on a commercial property. The tips we have provided here are just the tip of the iceberg. There are more where these have come from. You can go onto the Internet and do a search. You will find links to articles such as this one that ought to prove helpful. Additionally you may want to contact a realtor that specializes in commercial property. He or she can give you some excellent advice.

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