DC Fawcett Virtual Real Estate Investing club – Real Estate Housing Bubble
In the first quarter of 2017, 60 percent of the houses were affordable. Most of them availed 30–year conventional mortgage scheme and secured good credit score. DC Fawcett Virtual Real Estate Investing club
Three factors to check whether a home is affordable or not
- Median home price nationwide
- Average 30-year fixed mortgage rates
- Median household monthly income
An affordable home is a property whose debt-to-income ratio is 28 percent or less than median household monthly income. If you are planning to invest on a real estate investment property, it’s not the right time and you need to procrastinate. Low mortgage rate and affordability factor may not last for a long time.
When you are about to purchase the property, the prices would have become historically high. FHA loans require only 3.5 percent down payment, but there are new loan programs offer financing. Getting a pre-approval before the rise of mortgage rate is a good idea.
Purchasing a property is a challenge for millennials. If the home price goes up along with mortgage rate, it creates a negative impact on housing market. The demands are reduced whereas supply increases.
At one point of time, the home prices come to a standstill when rates are fluctuating. The homes price will not increase after a point of time when mortgage rate keeps on increasing. 5.5 million Homes were sold in 2016 making one of the best years in home sales.
The “5” forces in 2017 housing market
- FHA mortgage insurance
- Rising mortgage rates
- first-time home buyers
- Low inventory1
- High prices
October 2016 witnessed highest hike in the property value. Seattle, Portland, Oregon and Denver were few cities experienced the inflation.
The home-buyers either couldn’t afford to pay down payment or qualify for a mortgage which in turn reduced the percentage of affordable homes available for sale. With more buyers entering the market, there is a bidding war for homes with more demand and less supply.
Millennials prefer rental homes over home ownership as prices have inflated. 40 percent of the home buyers are millennials.
Different stages of Real estate bubble
PHASE I: RECOVERY
Characteristics of a recession: high unemployment rate; decreased investment, price of land is at its lowest point. With increase in population, the demand for homes increases.
We see a vast increase in vacancy rate across all types of real estate – office, retail, residential. This is happening due to investors opting for already vacant homes for the commercial and office space purpose rather than searching for new location. Already vacant homes charge less than new development.
PHASE II: EXPANSION
The phase changes to expansion when the market witnesses a change in the housing trend. The change is when most of the properties are occupied; vacancy rate must be historically low or nil. When supply meets the demand or there is an excessive demand for properties.
There must be scarcity for new homes. The profit is the key factor for developing new properties on the vacant land or rehabbing the existing properties.
Adding a new inventory to the real estate market is not a cakewalk. We all know the process of constructing a property is a lengthy formality.
Negotiation of land sales, permission and approval for zoning regulations, financing has to be sanctioned. Building a home takes a lot of time which depends on location, builder and other factors. By the time it is up for property listing, the phase II is already in the process. Along with that occupancy rate and rent would have increased.
PHASE III: HYPER SUPPLY
When the occupancy rate exceeds long-term average, there would be pressure on the rent. The first hindrance point in the real estate cycle is increase in unsold inventory. Growth rate is decelerating.
PHASE IV: RECESSION
The second hindrance point in the real estate cycle is transition from hyper supply to recession. The surplus inventory leads to lower occupancy and low rent which reduces the revenue for landowners.
The Third hindrance point in real estate cycle is increase in rate of interest. Though there are shortcomings, there is a drastic increase in borrowing cost. Lower occupancy and low rent is a buyer’s market.
The downturn in real estate trend has huge impact on the local economy. Recession is an unexpected event. The expansion phase occurs now and then and investors get to enjoy the benefits of home ownership.
DC Fawcett Real Estate Attributes Of A Financial Adviser
The importance of financial adviser is discussed in this content by DC Fawcett. We are also going to talk about the significance of the adviser and how much he contributes to the home sale.
His decisions are crucial when you buy a home. The mortgages, asking price, offer and taxes are some critical points in the process of home-buying and selling which is performed with the consultation of a financial advisor.
The financial adviser is easy to find as you can get every piece of information with the help of Google nowadays. You can look into NAPFA (National Associate of Personal Financial Advisors), AICPA (American Institute of Certified Public Accountants) , FPA (Financial Planning Association) are few ways to start your search.
The traits of a financial adviser can be studied through Fawcett’s review.
- Many investors just think that financial advisers should be well-versed in handling finances alone, but that not only helps. He should know the value of the investor’s money and his financial status.
- He should be able to give you alternative suggestions when your plan a fails, in other words an instant plan B should be in the hand whenever there is a mishap in plan A.
- There are trusts, stocks, REIT, groups etc in the real estate. He should have some knowledge on all the areas. He need not be an expertise, but not half-baked as it dangerous.
- Make sure you understand all the financial terms explained by the adviser. If not, stop and ask what he is trying to convey you. You can also read about financial terms by making use of the financial guides’ available online and virtual real estate investing club
- Risk is not certain as investors know the outcome; you can predict it and mitigate the effects.
- Don’t give your consent blindly without knowing what the financial adviser is doing. The qualified advisers will get an informed consent. Don’t sign any document blindly without reading terms and conditions. Sometimes the scammers are in the form of advisers and write whatever they want in the document, check whether the documents are legal or fake first.
How to hire a financial adviser?
The first and foremost, the adviser should have completed necessary certification from a reputed educational institution and undergone training which makes him/her qualified. Look out for professional designations so that it makes him qualified and the adviser is supposed to have profound knowledge.
It is merely waste if he either fails to express the skill sets wherever required or doesn’t help when you are in financial crisis.
Find how long he has been in this profession. Experience is one of the important criteria you have to check out. As real estate is a vast area, there are lots of issues to be looked into.
Question the adviser as much as you want and extract the information. Check out the adviser’s history; find whether he has been involved in any suspicious activity. He should be a good listener than a narrator. He should be able to fix your problems and not elaborate about his personal stuff.
DC Fawcett Real Estate What is the need for Family limited partnership?
What is FLP?
Involvement of family members in a business or assets left for them, and then it is called family limited partnership (FLP).DC Fawcett Real Estate The FLP can be established by spending a cost of 5000 to 10,000 dollars.
It is a partnership agreement signed in consent between the family members who are the active participants in trade or business. It is used to divide the income and profit equally among the family members. To administer the objectives of the family members, FLP is required.
The business can be in the form of real estate property which can be even vacant land or holdings or assets like gold, stocks, and bonds.
The advantage of FLP is to transfer the value of the assets to any member in the family which leads to reduction in the estate.
Types of Partnership
General and limited are two types of partnership. Initially, general partnership is created with interests of limited partnership. Now the general partner has all the ability to gift the limited partnership interest to his or her heirs or other eligible members in the family.
The general partnership gets the entire ownership over the asset as well as he or she can control the other members in the family whereas limited membership pass on their powers to their heirs and other eligible members in the family.
DC Fawcett discusses about the pros and cons of FLP.
Pros of FLP
- Reduces the burden of income tax issues as you can pass on the powers to your heirs.
- Transfer of ownership is systematic: The value of the shares remains with the value of the estate.
- Tax benefits
- Income tax savings from limited membership when you add your heirs onto your limited membership.
Drawbacks of FLP
- Heirs are burdened with capital gains liability which is based on the property type, which can be further studied with the attorney’s help.
- The stepped-up value is not constant.
- General members are prone to risk as do not have any protection for their asset.
- Minor (heirs) cannot get ownership easily: it requires the interest of a guardian or a parent membership. General members should control the activities. So, the family members cannot choose them for limited membership category.
- DC Fawcett complains about the exorbitant tax levied on the assets which are not oriented to business and may lead to capital gain unnecessarily.
- There is a financial loss when there is a property ownership transfer.
We infer from DC Fawcett reviews that the benefits are less in FLP but when executed in the right way, the family members can enjoy all the advantages. Don’t become a victim by getting involved in a scam; In order to do that, you need to consult a financial adviser to know in depth about FLP.
The attorneys generally deal with FLP’s and you can also take the help of financial planners. You can learn more about financial advisers and how to hire them by browsing DC Fawcett virtual real estate investing club.
DC Fawcett Virtual Real Estate Investing Club Collateral And Home Equity Loans
Collateral option is preferred by the investors when the loan amount is huge. The borrower has to be in consent with the lender that he is allowed to take a part of the collateral for selling purpose in case the borrower fails to make the payment. DC Fawcett Virtual Real Estate Investing Club Usually the borrower pledges his land and the borrower can expect a reasonable amount when he applies for the loan.
The collateral is used as an assurance from the lender’s perspective. It reduces the risk as he does not lose all his money when borrower falls short on his payment. The lender has all the rights to hold the borrower’s possession when there is a payment default, the possession can be sold and the amount can be used as reciprocal for the loan.
Instead of taking legal action and to avoid lengthy procedures, the lenders just sell off whatever the borrower pledges as collateral and make money.
Not only land, there are different types of collateral which is listed below.
- Real estate
- Savings account ( the lender takes the amount that is left in your account whichever is due)
- Insurance policies
Usually the lender only sanctions a loan which is very much less than the value of the asset. There may be certain situations where you may need to add collateral when the existing collateral loses its value.
Collateral loans are usually applied by business men as well for personal use. They are the last choice when the investor has a bad credit score as these loans are expensive.
Similarly, home equity loans are preferred when the borrower is in need of huge amount. These loans are not having much strict guidelines and easy to get qualified. It is more of a second mortgage, when the first home you own has resulted in sufficient home equity. These loans are considered to be safest and you cannot come across scammers and fraudsters as these loans are provided by the bank. Know you income and expenses before applying for the loan.
The following are the benefits of home equity loans
- Rate of interest is low
- People with bad credit score can apply for these loans as getting an approval are easier.
- The investors get tax deductions
When the borrower fails to repay, his house which is kept as collateral is taken by the bank and the foreclosure procedure comes into force. The risk factor should be kept in mind before applying for home equity loan. The fear of losing your property will stop you from applying the home equity loan at times.
Also the bank should not approve loans having higher amount as bank may face a financial crisis if all those borrowers default in payment. The borrower can avail two options namely HELOC and lump sum, which is more like second mortgage type. To know more about second mortgage, the uses read the blogs in DC Fawcett virtual real estate investing club.
DC Fawcett VREIC is far and wide familiar as the leading creative thinker on real estate trends; impacting the real estate entrepreneurial dealing. The virtual real estate investing club is its hub where so many have benefited as a successful realtor. He has held a number of seminars which throw light on demanding real estate concepts.
From the review, we infer the different phase of housing bubble. To prevent from real estate scams, visit DC Fawcett virtual real estate investing club where DC Fawcett has explained about the investment properties, pros and cons, tips for beginners. His articles have been read widely by all aspiring investors.