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May 4, 2016

How Much is My House Worth?

Are you wondering "how much is my house worth?" I have two answers for you. First, if you don't really need to move, it is worth whatever you say it is. If you think, "I wouldn't sell this house for less than $300,000," then it is worth that much to you. If you need to sell it, though, what it is worth to you is irrelevant.


Market value is the only relevant value once you are ready to sell. This is the value according to all the home buyers out there. They don't care what you spent renovating the house, or what you originally paid. Spend $50,000 adding a pool, and they may only pay $20,000 more for the home. Real estate is worth what the market says it is worth.


How Much Is My House Worth - Part One

To estimate the market value of your home, use "comparables." This is how appraisers do it. Find at least three similar homes nearby that have sold within the last six or maybe twelve months (these are your comparables). This information is in county records (sometimes online now), or ask a real estate agent with access to the multiple listing service. Get the sales prices, terms of sale, description of the property, and other information.

Take your first comparable, write down the selling price, and review the description item by item. Add to the sales price of the comparable for each thing it doesn't have that your subject home has, and subtract for each thing it has that your subject home does have. This sounds confusing, but it will make sense once you try it a couple times. 

For example, if your home has a second bathroom, and the comparable doesn't, add the value of the bathroom to the sales price of the comparable. If the comparable home has a blacktop driveway, and your's doesn't, take the value away. You'll have to estimate what these things are worth, or ask for professional help.

You are rectifying differences, to see what the comparable home WOULD have sold for if it was just like yours. If a comparable sold for $242,000, with one less bathroom than your home, and a bathroom is worth $15,000 in your area (ask a real estate agent for help with these figures), then you ADD $15,000 for the bathroom it doesn't have. Subtract, say $5,000, for the paved driveway it does have, that your home doesn't have. $242,000 plus $15,000, minus $5,000 gives you a comparable sales price of $252,000.

Do this with  each comparable, then average the three comparable prices. If, for example, the three comparables now have adjusted sales prices of $252,000, $262,000, and $249,000, add the three figures and divide by three. The indicated value of your home is $254,300. This is about what it should sell for.


How Much Is My House Worth - Part Two

Appraisal is an inexact science. If you can only find houses sold over a year ago, you should probably estimate appreciation in the area, and add that. If one sold with seller financing, you have to adjust for how this affected the price. These complications make it tough to appraise your own home, so what if you need help?

There are other ways to find out what your house is worth. You can pay for a professional appraisal. This way you will also have something to show to prospective buyers who doubt the value. Be sure to tell the appraiser about anything she might miss, like a newer roof, or specially imported tiles.

What about online services that tell you what your house is worth? They don't have enough access to sold prices of homes around the country to have a program figure the value of your house. Instead, they usually just take your basic information, e-mail address, and phone number, and sell this "lead" to a real estate agent that will contact you.

It is better to find a real estate agent on your own, and ask "How much is my house worth?" Find one who has sold homes in your area, and ask if she can do a "market analysis" of your house value. Normally this is free, with the agent hoping to impress you and get your business. Often, if the agent has experience and has worked in your neighborhood, they'll do a better job than an appraiser, and the price is right.


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Posted in Property Values
May 4, 2016

Investing in St. Louis Real Estate

It is common for investors to express uncertainty over their ability to manage their portfolios during prolonged periods of market volatility. But prudent investors understand that making sound investment decisions shouldn't be based on the markets twists and turns. Rather, these decisions should stem from an understanding of investment fundamentals and an awareness of the mistakes others have made. Keeping a few common mistakes in mind and steps to avoid them may help you as you work toward your goals.


Mistake #1: Maintaining unrealistic expectations


There is nothing wrong with hoping for the best from your investments  it is human nature. However, you could encounter serious long-term cash flow  problems if you base financial plans for the future on unrealistic  assumptions. According to an August 2004 Gallup poll, nearly one third of 800 investors surveyed expected to generate  profits of 10% or more in their portfolios during the next year. How  does that anticipated return compare with actual historical returns?  Based on data from Standard & Poors and the Federal Reserve, from  1926 to 2003, a hypothetical portfolio divided equally among stocks,  bonds and cash would have had an average total return of 7.3%  annually*. While the composition of your portfolio may be different  from the portfolio in this example, it is important to maintain realistic expectations in order to have the best chance at reaching your goals. Although past performance is no  guarantee of future results, familiarize yourself with the historical  performance of appropriate investment indexes or appropriate  benchmarks and use their average long-term returns to help maintain realistic expectations for your own investment returns.


Mistake #2: Chasing hot investments and overtrading


Investors tend to convince themselves that recent investment performance represents the future. The problem with chasing todays winning stocks  or mutual funds is that by the time you hear about the latest hot performers, you may have already missed out on all or most of the opportunity to participate in that price appreciation. Chasing past winners is closely correlated with another potential  investment mistake overtrading. Shuffling your investments too often  increases the chance you'll buy high and sell low a worst-case scenario for investment success. Overtrading also generates more  transaction costs and fees that cut into investment gains. One  potential solution: work with a financial advisor. An experienced  professional may be able to help you stay focused on your goals and  avoid the urge to trade frequently. In fact, studies have found that  investors who work with a financial advisor tend to hold on to their  investments longer and realize better returns than do-it-yourselfers.


Mistake #3: Failing to keep your balance


You might be surprised to find that strong or weak returns in one area have caused a shift in your overall investment strategy that could  affect your ability to reach goals or manage risk. Work with your  financial advisor to review your asset allocation once or twice a year  to make sure that it remains in line with your investment objectives.

Of  course, investment mistakes do happen, but many are avoidable. Learn  from the missteps of others, start applying these lessons to your  investment strategy and make a point of working with a qualified  professional.


Leveraging Your Investments


One of the best vehicles for your money is real estate. In St. Louis, we are experiencing an average return of 9 - 12%. Because there was not the fast and explosive growth that other cities experienced, the correction that the market is undergoing currently will not be nearly as volatile and will provide a much safer investment for home buyers. St. Louis real estate can also be much more affordable that in other parts of the country because it enjoys a relatively low cost of living. Many of the residents who have relocated to St. Louis have done so because of the affordability factor. Because of this, St. Louis is poised to enjoy a steady and comfortable growth over the next 20 years.Then the question remains - what to look for and how to know what to purchase. That is where you will need the experience of a proven real estate professional who knows the market, can demonstrate to you a proven track record of success. The real estate process can seem complex and daunting but working with an experienced agent can make all the difference. Currently in St. Louis, the downtown neighborhoods are turning over and experiencing a strong urban renewal. Neighborhoods to watch include Benton Park, Tower Grove East, Dog Town, Soulard, The Hill, and Old North St. Louis.

Oct. 17, 2015

4 Steps To Real Estate Investing Success!

Real estate investing can always be profitable, and sometimes it's ON FIRE. You may have seen one of the many real estate seminars touring the country that attract thousands of people. These eager investors spend thousands of dollars for real estate investing education and tips. 

It's shocking to learn that of all those thousands of "investors" who attend these seminars, 95% of them NEVER end up buying an investment property. Why? The real estate gurus sell the "sizzle" and make profiting from real estate sound easy. The truth is that it's simple, but not easy. 


There are basically four steps to investing in single family homes: 


1. Buy homes below full market value. Yes, people really do sell homes for less than the home's full value. The key is to understand that most homeowners will only consider a purchase offer that is all cash and within 5% to 10% of their asking price. 

 The successful investor learns to find financially distressed homeowners who have no choice but to sell for less than market value. They have lost their job or been suddenly transferred; they are divorcing; they been living beyond their income; the family has been overwhelmed with medical bills and, not uncommonly these days, their money has gone to support a drug habit. 

 Those are examples of motivated sellers. They have to sell and they will accept something other than a conventional, all cash offer. 

2. How do you find motivated sellers? You work at it! Like any business it is important to develop a little marketing plan. One that is simple, yet very effective, is the one that was proven 75 years ago by the Fuller Brush company; door to door sales. 

You are selling your skill as a home buyer to people who must sell. Your are there when they need you and you have the skill to help them solve at least part of their problem. With door to door prospecting you will learn more and buy more homes quicker than any other method. However, most people just won't walk door to door for three or four hours per week. OK, there are other ways. 

You can watch public notices for the announcement of foreclosure sales. Meeting with a home owner right after they've received a notice that they are about to lose their home allows you to deal with a very motivated seller. Other public notices that provide buying opportunities include probate, divorce and bankruptcy. You can follow the Homes For Sale listings in your local newspaper or Internet site. 

You can telephone the names found in these notices or, and this is the least time consuming, send a postcard expressing your interest in buying their property. It will produce buying opportunities, just not as many as personal contact. 

3. After you've found a motivated seller you must understand how to frame offers that provide benefits for both you and for the home owner. A good real estate investor quickly learns that this is not a business of stealing property, but of solving problems in a way that benefits the seller. 

The home owner is in a tight spot of some kind and you can save them from public embarrassment and, in most cases, give them at least a little cash to get a new start. 

No investor can afford to leave cash in every deal. No one but Bill Gates has that much available money. You must use creative techniques like, leases, option and taking over mortgage payments. Little or no cash is needed for those deals. You can find plenty of reasonable priced educational material on those subjects in book stores or on EBay. The same education that seminars sell for thousands of dollars. 

4. You make your profit when you buy! Never make a purchase until you've carefully determined exactly how you will get to your profit. If you hold it as a long term investment will the monthly rental income more than cover the monthly mortgage payment? Will you sell the deal to another investor for fast cash? Will you do some fix-up and sell the property for full value? Will you quickly trade it for a more desirable property? Have a plan before you buy. 

There you have four steps that even a part-time investor can execute in three to four hours per week. What's the missing ingredient? Your determination and perseverance. If you will unfailingly follow the plan for a few months you will be well on your way to financial independence.


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