Saturday, July 13, 2013

Real Estate Wealth by Rick Yost

We have all seen the many programs on television depicting investors buying distressed properties. The investors then renovate the property under the pressure of some arbitrary, stress inducing deadline and then sell it for a huge profit.  Nice work if you can get it.  There are now many people looking to flip houses because it looks so easy and profitable on television.  The reality is that it is neither easy nor as profitable as it seems on television.  To be a successful flipper, you need to have a strong understanding of home repair costs, knowledge of the market that you are going to be selling the house in, and the discipline to bring the project in on budget.  Many house flippers have found themselves underwater in projects that they paid too much for, spent too much on the renovation due to unforeseen expenses, or over estimated the value of the renovated house.  So as glamorous as it is on television, flipping is not the way to real estate wealth.

The real way to real estate wealth is to buy and hold properties that provide positive cash flow. Positive cash flow means properties that bring in enough revenue to cover all expenses with some left over.  These can be multimillion dollar office buildings, a multi- unit apartment building, or a condo that is rented.  Whatever your choice as an investment property, there are some guidelines to finding properties that will add to your wealth with lower risk.

First and foremost, plan on owning your property for a very long time. While values may rise and fall during up and down periods in the market, positive cash flow properties will continue to add to your wealth.  Here are some other guidelines to keep in mind.

Buy properties in low vacancy areas.  Areas with high vacancies can seem like a bargain, but don’t be fooled.  Properties can take longer to rent and are harder to get fair market rents for. High vacancy areas are also more subject to break in and vandalism, and are less likely to cash flow in down markets.

Buy a property that is well built and in really good shape. Properties that are a bit run down can seem like a deal, but one major mechanical or structural repair can ruin cash flows.  Buy a property that is going to start putting money in the bank as soon as possible.

Look for properties with solid, credit worthy, long-term tenants.  Good tenants make your life as a real estate mogul much easier.  You should examine the current tenant’s leases, credit application and payment history. If you buy properties with quality tenants in place, you get security deposits, steady rental income, and no need to do much to the unit.   Buying properties with home owners associations or other common interest requires much due diligence.  Check the association for any legal, operational or financial troubles.  Are there any lawsuits pending? Are there any looming repair expenses?  What are the association’s reserves?  Ask the tough questions or risk being stuck with a bill.

The next guideline is the most important- location, location, location and not the location you think.   Everyone would love to have a beach rental, an Old Port rental or a Cape Elizabeth rental, but they would be making a mistake. These glamour properties often produce negative cash flow or produce low returns.  Look for properties in moderately priced areas with lots of working class tenants.  These properties tend to cash flow best over time.  They are cheaper to acquire, cost the same to maintain, and tend to have low vacancy rates.  Think Westbrook, not Western Prom.

As always, uses a qualified realtor to guide you through the process.  Buy it, hold it, and get on the path to real estate wealth.

Rick is a Windham resident, author, and realtor.  He can be reached for any of your real estate questions at

Monday, July 8, 2013

Another indicator that now is the time to sell and/or buy a home in Maine by Carrie Colby

Lending home sales rose in May to the highest level since late 2006, implying a possible spark as mortgage interest rates began to rise, according to the National Association of Realtors.

The Pending Home Sales Index, which is a forward-looking indicator based on contract signings, increased 6.7 percent to 112.3 in May from a downwardly revised 105.2 in April, and is 12.1 percent above in May 2012 when it was 100.2. The data reflected contracts, but not closings. Contract activity is at the strongest pace since December 2006 when it reached 112.8. Pending sales have been above year-ago levels for the past 25 months.

Lawrence Yun, NAR chief economist, said, there may be a fence-jumping effect. “Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher,” he said. “This implies a continuation of double-digit price increases from a year earlier, with a
strong push from pent-up demand.”

Existing-home sales are projected to increase 8.5 to 9.0 percent, reaching about 5.07 million in 2013, the highest in seven years, slightly above the 5.03 million total recorded in 2007.

Pending home sales in the northeast were unchanged at 92.3 in May, but is 14.3 percent above a year ago. In the Midwest, the index jumped 10.2 percent to 115.5 in May and is 22.2 percent higher than May 2012. Pending home sales in the south rose 2.8 percent to an index of 121.8 in May and are 12.3 percent above a year ago. The index in the west jumped 16.0 percent in May to 109.7, but with limited inventory is only 1.1 percent above May 2012.

The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. For additional commentary and consumer information, visit and

All real estate agents licensed in the State of Maine belong to the Maine Association of Realtors and the National Association of Realtors.

Carrie Colby is a realtor, the broker/owner of Premier Properties in Raymond. To contact Carrie, email

Monday, July 1, 2013

Is it time to be a landlord? by Maggie Krainin

If you own residential property that isn't currently occupied, or soon won't be, the answer could be “yes!"

The Sebago region is growing. Families are moving into the area, executives overseeing projects and startups come and go, families who are already here go through normal life stages of up- and down-sizing and reconfiguring their households.

Your own housing needs may fit that pattern, too. If its size or location aren't currently convenient, if your work relocates you, or your family's needs are changing, you should consider renting your home. And if you've already moved out and are trying to sell it, renting your home could make a big difference to your finances until the market catches up.

In all likelihood, your property is already in condition to be rented – though you will probably need to make some preparations first, such as cleanup, minor repairs, painting, and of course you will need to decide whether all or partial furnishings will be included. Most year-round tenants are seeking an empty house.

The other rentability consideration is location. Naturally the market for convenient and short commutes to work centers is stronger than it is for properties far out in the boondocks! However, the great equalizer for inconvenience of all kinds is price. If your property is priced appropriately, not just for size and condition, but also for location, you should have no difficulty finding tenants.

So you know there is demand for rentals. And you know your property will likely be rentable. The question is do you really want to be a landlord all by yourself? It's definitely a commitment of not only your property, but your attention for a period of time -- like a job.

I like to say that every job is a service job, and every service is a human service – but it goes double for landlording! As a landlord you will be responsible for safe and decent conditions at the property, potable water, functioning equipment, and the peaceful, undisturbed use of a well-defined space by your tenants. It's important to formally acknowledge that commitment to yourself and everyone who will be assisting you (family, business staff, agents), before you begin.

You will need to advertise, show the property, screen tenants, negotiate leases and rental agreements, arrange move-ins and move-outs, process rent payments and sometimes deal with issues of nonpayment, and respond responsibly to both slow-moving and emergency maintenance situations.

If you know you want to rent but you also know you don't have the time or inclination to manage all these factors, hiring a rental agent is the answer. And if you also have urgency created by financial need, though it may seem less expensive to do everything yourself, it's faster, more efficient and ultimately more cost effective to hire an agent, because it's really hard to take on a project of this size in addition to all your other responsibilities, and especially when pressure is on you to get everything done fast.

TV programs about real estate show dramatic pitfalls and stress of property management and maintenance, and difficult experiences with tenants. These shows go looking for drama – the everyday truth is not so extreme. However, if you don't know what you're doing, trial and error, or learning as you go, can be very costly.

Now is the time of year when demand for rentals is highest in the lake region – people want to get situated while the weather is good and before school reopens. The other times when demand is high are after the holidays and nearing the end of winter.

If you've been thinking about renting your property, now would be a good time to take the plunge. And if you're not sure how to proceed, call a rental agent. They will be happy to visit the property with you and give you recommendations for work that's needed and price.