Smart Property Investments Can Secure Your Family's Future

If you are an elderly citizen, you can use part of your savings to invest in real estate and if you invest smart, you are likely to earn above average returns on your investments. Although many investors shunned the housing industry after the subprime mortgage crisis of the mid-2000s, the industry is currently showing healthy signs of recovery. On the average, real estate values, rose by 28% in 2011, according to a survey carried out by ActiveRain. The aforementioned report also says that new construction starts are likely to rise by 21% and real estate transactions by about 11%. With some bit of advice from an expert in real estate investment, you too can get in on the act. Even then, here are some great tips

Monitor Foreclosures

The secret of turning a profit from property investments is buying low and selling high. If you have never bought foreclosed homes before, utilize foreclosure-listing services. Of course, being an elderly citizen, you may not have the energy or the time to run up and down your area looking for foreclosure deals. Therefore, use the information provided by firms that provide these services to find properties that you can buy. It is wise to choose houses that require moderate renovations in order to keep the renovation costs low.

Find a Mentor

Unless you have worked in the real estate industry before, do not assume that you know everything. In fact, you should find a mentor with a good grasp of housing industry dynamics. Within a short period, you will gain invaluable insight that would have taken years to master. This is in addition to building a network of professionals in the industry. You can use such relationships to find houses for sale in prime locations before other buyers.

Leverage the Power of Portfolio Lending

Contrary to popular belief, the wealthy do borrow money to finance their business ventures. You too can use the same strategy to build a real estate empire. The trick lies in understanding how portfolio lending works. Normally, mortgage lenders such as banks sell the loans to investment bankers who in turn package and offer them as investments to the public. However, there are certain requirements that one has to meet in order to qualify for a loan. For example, homebuyers have to put up a down payment. This is not the case with a portfolio lender. Because such lenders do not sell the loans to investment bankers, you can borrow as much as 100 percent of the purchase price of a property.

Benefits of Real Estate Investments

Federal Tax Benefits

The idea of paying taxes does not thrill individuals or business owners. One way of reducing your tax burden is by purchasing rental properties. To start with, you can deduct some of your property's value from your income because the Federal government allows it. Secondly, the IRS considers rental income as passive income meaning you do not have to pay self-employment taxes. By keeping more of the money that you earn, you will maximize rental earnings.

Appreciation

This is the increase in value accrued by a property over time. Even carrying out minor renovations can increase the value of your property significantly. Other factors that play a big role in determining appreciation include inflation, supply and demand, as well as economic growth. Avoid the temptation to sell at the first sign of trouble in the housing industry. Over time, your investment will appreciate and return a healthy profit.

All it takes to invest in real estate is a willingness to learn and some bit of capital. Start by finding a mentor to help you navigate the tricky housing industry terrain. It is also wise to monitor foreclosures closely and leverage the power of portfolio lending. The good news is you can sell your properties in the future for a tidy profit and enjoy federal tax benefits as well.

Author Bio
Joshua Turner is a writer who creates informative articles in relation to business. In this article, he offers a few tips in regards to family finances and property investments and aims to encourage further study with MU Real Estate Degrees Online.

Are Mortgage Rates Higher for Investment Property?

If you ever applied for a new mortgage or refinance, one of the questions in the application is if the mortgage is for your primary residence, a vacation home or an investment. Why do they ask this question? It's because the way you use your property determines what your mortgage rate will be.

Homeowners will be happy to learn that primary residences are given the lowest mortgage rates. It has to be the home you live in or plan to live in. If you're buying a second home or a vacation property you're going to be paying a higher rate. On vacation property there are also stricter underwriting guidelines. So be ready for that. 

If you're applying for a mortgage for an investment property you will be paying an even higher mortgage rate. An investment property is defined as a property you intend to rent or one you intend to resell at a profit. Mortgages on investment property are considered risky, as result you will paying higher fees and making a much larger down payment.

A Mortgage on an Investment Property is more Expensive

It does cost you more to finance a rental property, but how much more? If you're a borrower with a FICO score of 680 you will paying an extra 3 points in fees for the mortgage in closing costs or have a higher rate that's between .375% - .5% higher. The reason rates are higher is the lender is taking on more risk and the buyer has to pay the lender for that extra risk. Extra Risk? Investment property with a mortgage is riskier for the lender because if loss of rental income or home values drop the rental property owner has no reason financially to continue paying the note.

Remember over the last few years the home default problems we have been experiencing has come from people buying second homes or investment property. People will stop paying their investment property note before the note on their primary residence.

What are the rules to Qualify for a Second Home Mortgage?

Lenders have to follow a set of rules for you to qualify for a Second Home mortgage. Also don't try to qualify your investment property as a second home, lenders have a set of rules that you must follow so that doesn't happen.

Rules to Finance Property as a Second Home

• The residence has to be far away enough from your primary residence. If it's in the same town it doesn't qualify. 
• You must reside in the property at least some part of the year. 
• It can't be a multi-unit bldg. It must be single-family residence. 
• It has to be a property that can be resided in year round. 
• It can't be a timeshare or have a management company have control over it. 

If you are buying or refinancing a mortgage for your second home there are no additional fees. But there are limits set by Fannie Mae and Freddie Mac for the amount of the mortgage.

No matter what type of property you need to finance, today is the best time to lock in your rates. It's not going to get any lower than it is now.

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