Real Estate Information Archive

If you're thinking about investing in a rental property, experts say low home prices combined with low interest rates make this the best time in years to become a real-estate investor.  Couple this with the increase in potential renters due to foreclosures and the recent shaky economy, and you may well decide to become a first-time investor in Chester County PA real estate. 

It isn’t difficult to get into the real estate investing world. In fact, it’s rather easy. But it does require being smart and dedicated—and avoiding easy-to-make mistakes. These tips for a first time real estate investor should be beneficial in helping you become more knowledgeable and competent in sidestepping common pitfalls.

• Tip 1:  Educate yourself:  Visit numerous online sites, consult with seasoned investors of Chester County PA real estate, become familiar with terms and jargon, investigate lending procedures, explore possible locations, and analyze your personal financial situation.  Carefully researched knowledge will keep unpleasant surprises at bay.
   
• Tip 2:  Formulate a plan:  Most experts advise first-timers to limit their initial investments to residential Chester County PA real estate (many recommend concentrating on foreclosures) and to know in advance how much of a “fixer-upper” they want to take on.  Predetermining preferred locations (think in terms of schools, insurance rates, job availability, taxes, amenities, etc.) is also essential, as is deciding whether you will manage the property yourself.
   
• Tip 3:  Get your ducks in a row:  Speak to potential lenders or even a financial planner about whether you have enough assets to handle the ups and downs that could come with investing. Even if you plan to rent out the property, count on paying the mortgage whenever there's a vacancy.  It’s certainly a good idea to get pre-approved for an investment property loan.  It’s also useful to line up individuals/companies who can take care of various maintenance needs before you need their services for your Chester County PA investment real estate.
   
• Tip 4:  Be patient, but persevere:  As the market recovers, finding the “perfect” property is becoming more difficult, but it is not impossible.  Once you figure out where to look, you’ll be able to find them more easily, and you’ll start making money!  Be forewarned: there will be numerous high and low points in your stint as an investor, but if you are confident about your plan and are determined to work towards it, odds are you’ll succeed!

Whether you are thinking about leaving your because of employment, health, a desire for a change of scenery, retirement, etc., a move to a new location is not to be undertaken lightly and requires research on your part to be successful.  While most potential transplants are aware of the need to check out housing costs, air quality, job market prospects, available health care, specific amenities, and school ratings, not all fully comprehend the economic impact relocation may have on their lives.

Areas worth investigating:

• Moving expenses:  Inquire about an employee relocation package which covers all or part of the costs of your move.  Even if your new employer doesn’t offer any financial assistance, you might be eligible for partial reimbursement at tax time, which can definitely ease some of your financial stress. (Click here to see which expenses qualify.)  Remember to include the cost of your travel from your Chester County PA home, lodging, and food in addition to the cost of moving your possessions as you calculate expenses.  (Take advantage of sites such as www.Upack.com or Moving Guru.com to assist you.)
   
• Job market:  While you may have secured a well-paying job, what are the prospects for your spouse?  What is the salary range for that field?
   
• Transportation:  What is the cost of public transportation, fuel, tolls, and parking?  Will you require a second car?  What is the personal property tax rate for autos in your new location?
   
• Municipal fees:  Are there additional costs particular to your new municipality?  What is the average rate of utilities?  Are parks, playgrounds, and museums free?  Contact the Chamber of Commerce in your new city for this type of information.
   
• Overall cost of living:  Since you will need to compare the average cost of living you had in your Chester County PA home with that of your new surroundings, you will want to take advantage of sites such as Best Places for actual facts and figures related to food, housing, utilities, transportation, health costs, and salaries in each location.  For even more detailed information about these categories, you can’t go wrong with that supplied by Numbeo.com.

As the owner or potential owner of Chester County real estate, there are two currently popular options re: your mortgage that you might want to consider:  early payoff and/or shorter term.  As mortgage rates sink deeper into record territory, many homeowners are in a position to explore the possibilities of paying off or paying down their loans or choosing a 20, 15, or even 10 year term rather than the traditional 30.

As with most any financial transaction, experts disagree about the advantages and disadvantages of an early payoff.  Most, however, will tell you that the decision to pay off your Chester County real estate mortgage early should be based on a number of factors, including:

• Your ability to sustain your desired lifestyle during retirement. If using your savings to pay off the mortgage, don’t forget to give yourself a financial cushion for life’s inevitable surprises.
• The interest rate you are paying on your mortgage. If your current interest rate is high (i.e., greater than 5 percent or variable) and you are unable to refinance, it might make sense to pay off the mortgage earlier.
• Your tax bracket (i.e., how beneficial the mortgage interest deduction is to you).
• Psychologically, the importance of not having a mortgage. Some folks derive significant satisfaction in having no debt; for others, it’s not a big concern.

To further aid you in making a decision in this matter, visit Forbes for more detailed information and Bankrate.com for an easy-to- use early payoff calculator.  Click here to learn more about paying down a mortgage as opposed to paying it off.

Much has been written recently about the recent trend of taking out Chester County real estate mortgage loans for fewer than the traditional 30 year term.  More and more homeowners are refinancing, lowering their interest rate, and opting for a shorter-term loan. Also, if you’ve paid down your principal significantly, current interest rates are substantially lower than your old interest rate, your income has increased, or  your non-mortgage debt has decreased, you might be able to afford the monthly payments on a 15-year mortgage. In addition, recent changes in the Obama administration’s Home Affordable Refinance Program (HARP) recently cut the fees for certain borrowers getting new loans if they reduce the term of the mortgage to less than 30 years.   Click here to see interest rate comparisons for varied terms.

Buying Chester County PA real estate involves more out-of-pocket costs than just the down payment. There are also closing costs to pay for items such as title policies, recording fees, inspections, courier charges, and fees that a lender charges.  As a rule of thumb, closing costs to buy a home run about 2 to 4 percent of the purchase price.  Much depends on the points and origination fees a lender charges to make the loan, which are disclosed in the buyer’s Good Faith Estimate--actually a lender's "best guess" estimate of all the costs associated with obtaining a loan. (Click here to calculate your own estimate of the closing costs of your Chester County PA real estate.)

It might be harder to get a loan today, but it costs a little less to close one than it did a year ago because lenders are estimating closing costs better, according to the latest annual survey of closing costs by Bankrate.  The average cost to close on a mortgage in the United States dropped 7 percent over the past year to $3,754, according to Bankrate.com’s eighth annual closing costs survey, which was released recently.  Title insurance and other third-party fees fell 12 percent from 2011, while origination fees edged down one percent

Bankrate surveyed up to 10 lenders in all 50 states plus the District of Columbia in June of this year.  Researchers obtained online good faith estimates for a $200,000 mortgage to buy a single-family home with a 20 percent down payment. Costs include fees charged by lenders, as well as third-party fees for services such as appraisals and title insurance. The survey excludes taxes, property insurance, association fees, interest, and other prepaid items.

“This is the second year in which lenders are required to estimate third-party fees within 10 percent of the final cost. It seems like they’re getting more accurate, which helps explain the sharp decrease in these fees over the past year,” says Greg McBride, CFA, Bankrate.com’s senior financial analyst. “The main lesson of this survey for consumers is to shop around for at least three different estimates. While no one is going to move to a new state just because closing costs are lower, it’s important for people to realize that there is variation even within their neighborhood, and that they can save by being an educated consumer.”

For possible ways to lower the closing costs of your purchase of Chester County PA real estate, click here.

There are many reasons to consider downsizing your present living quarters—retirement, an empty nest situation, financial pressures, a desire to have more free time, health conditions, etc.—but it is not a decision to be made without first doing extensive research, examining your finances, and evaluating the emotional impact of such a move.  As with any major change which affects your life, there are both pros and cons to be recognized and analyzed before taking—or not taking—the final step.  It is wise to consult a Realtor who specializes in downsizing and to read this article on the subject from Smart Money magazine as you investigate the possibility of leaving your Chester County PA home for a smaller residence.

Reasons to stay where you are might include:

• Needing the room you have in your current Chester County PA home for guests and visits from family, especially grandchildren!
• Being unable to part with so many treasured items or large furniture pieces
• Requiring a great deal of storage space
• Feeling comfortable in a large home where you have room to move around
• Belonging to a familiar neighborhood surrounded by friends
• Finding the task of packing and moving too daunting to consider
• Paying high HOA fees and living with restrictions in a condo or townhouse community.

Reasons to downsize include:

• Increasing your monthly cash flow.  Downsizing will result in a smaller mortgage payment; lower utility bills, maintenance costs, and property taxes; and less expensive insurance on your new home.
• Having extra free time once spent on cleaning, doing yard work, and maintaining a larger home.
• Enjoying an easier, less stressful lifestyle with fewer responsibilities.
• Moving to a neighborhood of like-minded individuals—a golf or tennis community, e.g.
• Planning ahead for unforeseen health problems and aging.

If, after weighing both the pros and cons, you decide to downsize your Chester County PA home, there are many sites on the Internet that can help you analyze your finances, estimate moving costs, deal with the emotional factor, and organize the downsizing process itself.  RISMedia offers five solid tips for efficiency, and About.com deals with market timing and when to sell your current home (answer: before you buy a smaller one!)

It is also helpful to personally talk with others who have downsized, Those who decided not to, a Realtor, and your accountant.  This is, after all, a major step in your life, and the more input you receive, the easier it will be to make an intelligent decision.

Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers of Chester County PA homes finance their purchase, which means that nearly all buyers -- especially first-time purchasers -- require a loan.  The real issue with real estate financing is not getting a loan (almost anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.

Realtors routinely urge prospective buyers to get pre-approved for a loan before they even begin looking at Chester County PA homes. They also stress the importance of obtaining a letter of pre-approval rather than of pre-qualification.  Although many homebuyers use these two terms interchangeably, there are significant differences between the two.  Simply stated, pre-qualification lets sellers know that a prospective buyer of their Chester County PA home is likely to qualify for a loan, whereas pre-approval, although not an absolute guarantee, indicates that a loan officer has determined a borrower is credit-worthy and financially able to qualify for a certain loan.

The advantages of searching for a Chester County PA home with evidence of pre-approval in hand are many.  In essence, they include the following:

• Mortgage preapproval is going to tell you exactly how much money you can borrow. This way, you will know how much your mortgage payment is going to be ahead of time.
• You won’t waste time (or be sorely disappointed) by looking at houses you can’t afford.
• Sellers and Realtors will take you seriously.  They are much more comfortable with the certainty that you can obtain a loan (and that the deal won’t fall through), and thus may be more willing to negotiate.
• Once you find a home, the mortgage process can proceed more quickly because your lender will already have. 

Although lender requirements for pre-approval may vary somewhat, be prepared to supply the following information:

• Purchase Agreement
• Social Security Number and Date of Birth
• W-2/1040 Forms
• Recent pay stubs
• Bank account statements
• Credit card statements
• Debts and liabilities
• Mortgage or rental histories
• Investment properties
• Employers
• Asset statements
• Personal property
• Current and previous statements

Supplying all this information may seem like a time-consuming process, but in the end of your house-hunting journey, you’ll be glad you did it!

This article from Rismedia.com is great news for Chester County PA real estate:

Housing starts will nearly double and home prices will begin to rise in 2013, with prices increasing significantly in 2014.

Those rosy predictions come from a new semi-annual survey of 38 of the nation’s leading real estate economists and analysts by the Urban Land Institute’s Center for Capital Markets and Real Estate. The economists foresee broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014, including:

• The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent in 2014.;
• Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise;
• Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments.

These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from an expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.

The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index (CPI) is expected to be 2.4 percent, 2.8 percent and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.

The survey, conducted during late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014.

While the ULI Real Estate Consensus Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad, says ULI Chief Executive Officer Patrick L. Phillips. “While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years. These results hold much promise for the real estate industry.”

A slight cooling trend in the apartment sector—the investors’ darling for the past two years—is seen in the survey results, with other property types projected to gain momentum over the next two years. By property type, total returns for institutional quality assets in 2012 are expected to be strongest for apartments, at 12.1 percent; followed by industrial, at 11.5 percent; office, at 10.8 percent; and retail, at 10 percent. By 2014, however, returns are expected to be strongest for office, at 10 percent, and industrial, at 10 percent; followed by apartments at 8.8 percent and retail at 8.5 percent.

The forecast predicts a modest increase in vacancy rates, from 5 percent this year to 5.1 percent in 2013 to 5.3 percent in 2014; and a decrease in rental growth rates, with rents expected to grow by 5 percent this year, and then moderate to a growth rate of 4.0 percent for 2013 and 3.8 percent by 2014. This may be indicative of supply catching up with demand.

For the housing industry, the survey results suggest that 2012 could mark the beginning of a turnaround—albeit a slow one. Single-family housing starts, which have been near record lows over the past three years, are projected to reach 500,000 in 2012, 660,000 in 2013, and 800,000 in 2014. The overhang of foreclosed properties in markets hit hardest by the housing collapse will continue to affect the housing recovery in those markets. However, in general, improved job prospects and strengthening consumer confidence will likely bring buyers back to the housing market.