Real Estate Trends- The Pros and Cons of Jumping into the Housing Market

 It is still the American dream to have our own little chunk of land. It is estimated that more than 70 million Americans own their own home. With the growing interest in real estate, it is becoming easier than ever to be approved for a loan and move into your dream house. However, real estate isn't just about carving out your piece of the world anymore, it is a booming business and game with advantages and disadvantages left and right.

Some growing trends in the housing industry include buying foreclosures, flipping homes, investing in new construction, taking out interest only loans and using reverse mortgages; all are increasing in popularity. The market has shifted from working for your home, to learning how your home can work for you. But, just like every genie in a bottle, there is often a catch to making your wishes come true.

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These are a few pros and cons to these growing housing trends:

Foreclosures

A foreclosure is a home or property that has been repossessed by the bank or mortgage company because the previous owners could not make their payments.

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Pros

• Since the mortgage company would like to get rid of the property as quickly as possible often the home is sold or auctioned at a price considerably lower than it's market value. Often the house is sold only for what is owed on it.

• Foreclosures often enable those who wouldn't be able to afford the home of their dreams a chance. Sometimes you can get a great property at a great price.

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Cons

• Sometimes, especially at auctions, foreclosures are sold "site unseen." Which means you could be buying a home with a serious number of problems. And in the end, the money saved getting the property could easily be spent in repairs.

• This brings us to our second point. Often those being evicted know they are being kicked out of their home and destroy the place before they leave, which could create many fixer upper projects for the new owner.

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• If the address or neighborhood information is available, do a little research. Sometimes the house is worth less than the amount of money owed.

• Beware of liens on the property, such as unpaid property taxes. Consider if the previous owner was unable to make the house payment; it is likely they were unable to make other required payments. If there is a lien on the property, the new owner may be expected by the state or county to pay these fees.

House Flipping

Flipping is old as real estate itself; however, with the astronomical rate that property values have grown to in the last 10 to 15 years, many amateur investors have gotten in on the flipping game. Often an investor will buy a rundown or foreclosed home and provide it with some much needed TLC. They will renovate and remodel, upgrading kitchens, bathrooms, floors and landscaping often in a short period of time. Then they will turn around and sell the house for a considerable profit. However, this is a risky business and there is huge window for failure. Just like gambling there is potential to win big, but there is also opportunity for great loss. For more visit : remontti tampere

Pros

• If done correctly a lot of money can be made very quickly. Sometimes investors bankroll two or three times what they originally put into the property.

• There is great potential for learning how real estate works and thus, some become experts and in some cases make a fulltime job of house flipping.

Cons

• This is a high-risk endeavor. Sometimes the cost of renovations, mortgage and time ends up costing more than your eventual profit margin.

• Frequently these homes need a lot of work. For the best returns, kitchens, bathrooms and floors all need to be replaced. Some can get away with splashing on a coat of paint and calling it good, but these are not the people rolling in the dough.

• Know if you can afford the property in advance. It doesn't do any good to buy a house and sit on it for several months if you can't afford to make the payments not only to the bank, but to your contractor, landscaper and real estate agent. Make a plan before ever spending a dime.

• Most flippers buy homes that are several years old and often they have unanticipated problems lying under the surface such as foundation cracks, termites or mold. Have a back up budget just in case renovations do not go as smoothly as planned.

• Usually the investor has to pay the buyer and seller realtor commission.

• Flipping a home too quickly may result in a tax audit. If the money made off a house flip does not immediately roll into a similar investment, ie. another house flip, your profit may be subject to a capital gains tax.

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Buying a Newly Constructed Home

Although the concept is old, it seems many rural farmers are selling their land to large contracting companies. Newly constructed homes in newly developed subdivisions are a popular choice for those with children or starting families.

Pros

• Everything in the house is new. Since no one has used the appliances, walked on the rug, or tampered with the hot water heater, everything is still shiny and in top-notch shape.

• Everything in the neighborhood is new. Newly developed subdivisions usually imply that new parks, schools and shopping centers will soon be built to create an all-inclusive community.

• New homes are typically larger than existing homes. They have more bedrooms, bathrooms and square feet.

• Contractors allow future owners to customize many amenities like countertops, flooring or stainless steel appliances.

• New homes usually appreciate faster than existing homes.

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Cons

• Everything in the house is new. Unfortunately, newer isn't always better. Sometimes new products don't work as well, there are bugs and kinks even the manufactures and contractors are not aware of, and new owners are the ones writing nasty letters about how easily their new dishwasher clogs or how quickly the basement floods in a heavy rain.

• New homes cost more. Although new homes are usually larger than existing ones, they also have a higher price tag than their existing counter parts. Not only are you paying for the lot and construction of the house, but the price usually includes subdivision development costs like water, sewer and roads.

• Usually the finishing touches like landscaping and basements are left unfinished.

Interest Only Loans

With an interest only loan you only pay the interest on your home for the first five, 10 or 15 years of the loan, thus creating lower payments for the first few years you're in the home. This often allows people to get into homes they typically wouldn't be able to afford with a traditional mortgage loan. Click here : kylpyhuoneremontti

Pros

• Payments are significantly lower in the first few years of ownership. Therefore, you can afford a more expensive home at a cheaper price.

• Your payments are 100% tax deductible for the term of your interest payment.

• Paying lower payments early can free up money to invest and place into the home later.

• If you are able to sell the home within your interest period, usually five or 10 years, and the home has appreciated, there is the possibility of getting a return on your investment.

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