Working With Investors

Over the past few years the real estate game has been jam-packed with investors looking to buy distressed properties and flip them for a quick buck. Knowing how to work with these investors is essential in times of low interest rates and depreciating markets. Now that the market is substantially picking up and interest rates are rising, investors are beginning to dwindle but to be a valuable asset as a realtor you must know a few things when servicing investors.

First and foremost, know what the comps are going for in the area. I'm not talking about just the comps of other fixer-uppers but also know the comps of what these houses are worth after a rehab job has been done. This is essential because this is where you're going to find out what your ROI looks like. My rule of thumb with real estate investing is you always want an ROI greater than 15% on a flip. There are much simpler investment vehicles where you can achieve an 8% return with not as much risk.

Second, know how much money will be put into the rehab job to get the house into a condition where it can be sold. Now, before putting in an offer I HIGHLY recommend having a contractor come out to the property to give you an estimate on how much work needs to be done so you know exactly how to position your offer. However, if you're running through a ton of potential properties with buyers like I've been doing lately, use a simple spreadsheet to estimate roughly how much money will be put into the property. This is a spreadsheet I made with prices based off of home depot to give my clients and estimate of how much work we're looking at.

Before submitting the offer, make sure that you run a thorough investment analysis because you do not want to have a "dog" (an investment that's not profitable) on your hands if the offer is accepted. Make sure to take all factors into consideration when running this analysis. Account for everything from mortgage/closing fees, rehab expenses, prorated property taxes, recording fees, time value of money and any other expenses you come across. On the sales side you're including sale price minus realtor commission, realty transfer tax, property taxes, attorney's fee, etc. A general rule of thumb is to always inflate expenses 10% because you're bound to miss something.

When it comes time to submitting the offer, it is absolutely necessary to submit this offer in person to the listing agent and owner of the property. When you're going to buy a property with the intentions of a flip you must show the agent/owner how you came up with your offer number because usually it will be extremely low. Included in this offer presentation should be the comps of similar homes in the area, the comps of homes in the area after the rehab work has been done, an estimate from a contractor, and your investment analysis showing how much you plan to profit on this property. Just a little tip of advice if you plan on profiting 50% ytd, the seller is probably not going to take you seriously.

Working with investors can at times be hectic because of the sheer volume of offers you'll have to submit but if you can establish your self as an investors specialist you'll have a nice source of recurring business. If you'd like me to forward along my investors spreadsheet please e-mail me KyleKovats@gmail.com.


- Kyle Kovats, New Jersey Realtor

The Value I Bring as a Realtor

Let's face it, most realtors are extremely lazy. I noticed this while I was in college and working as a realtor part-time in Hoboken and  a bulb went off in my head that with my work ethic and my energy, I could really differentiate myself from the bunch and be a great real estate agent. A couple years later, after much brainstorming and reading I've really been able to differentiate myself from the competition.

With the sellers I work with, I expand their buyers market. Now, 90% of all homes that sell, sell to buyers in a 5 mile radius of the home. I don't think it's a coincidence that 90% of all homes are also listed with a brokerage within a 5 mile radius of that home. To combat this stat and expand my clients buyers pool, I market my properties to people in the Hoboken and NYC markets. The reason I market to those areas is because the next logical step after you've lived in Hoboken or NYC is to start a family in the suburbs and the West Essex area is a great place to do just that. Bigger pool of buyers= more looks at the property= multiple offers on the property= bidding wars= higher sales price. Again, this isn't rocket science it's just about going above and beyond for your clients and that is something I will always do.

With the buyers I work with, it will be the easiest transaction you're ever involved in because I am a one-stop shop. Not only am I going to find you a house that fits your needs, I am going to refer you to just about every service you're in need of whether it be a mortgage broker, attorney, home inspector, landscaper, interior designer, general contractor, you name it and I will have a professional on speed dial for you to get in contact with. In the case that I cannot find you a house that is currently on the market that fits your needs, I will begin calling homeowners of homes that were previously pulled off the market whether their listing period expired or they withdrew the listing from the market just because they were frustrated. I will be able to find all my clients a home that suits their needs. What's even better is that in the case I do find you a home that is off the market that fits your criteria, we will be bidding against ourselves and the seller will be paying a smaller commission rate, which means that I can get you a great deal on the property.

As always, if you have any questions or know of any friends/family with questions about the services I provide, feel free to contact me on my cell phone (201-403-1314) or through e-mail (KyleKovats@gmail.com). Have a great day!

Does Social Media Help Sell Homes?

The answer is both yes and no.

If you're expecting to get your home sold strictly through social media networks such as facebook, twitter, or instagram, I'm sorry to say that you're sadly mistaken. However, these social networks can definitely be valuable assets to a realtors business. For example, for the clients that I work with, I make them a facebook fan page of their home. On this fan page I basically describe in full detail the features and benefits of both the home and the surrounding area with links of what to do and where to go. To check out a sample facebook fan page I made, check out this link here . Let me add that, I really don't think you can expect to sell a home on facebook, however for buyers that are new to the area and want to know more, this is a valuable outlet for them to do so.

On that facebook fan page you will notice that the pictures actually look pretty professional, I thank our friends over at instagram for that. Instagram is a valuable tool for taking pictures of homes you are trying to sell, nothing more, nothing less. Let me just reiterate, you are not going to get your home sold on instagram.

Twitter in my opinion is pretty much useless in regards to selling a home. The only value that twitter brings to the table is letting an agents center of influence know that they have a listing. It can't kill you to post it though as the ROI is infinite.

So how do you get homes sold? Well, in today's market, most housing searches begin on the internet. It is very important that your agent be up to date with the most popular real estate websites and has a sufficient SEO system that will get your listing featured. Also, make sure that your agent is someone that you like and trust. Keep in mind the typical sales process from original list date to closing is anywhere from 4-6 months, so you're going to have to deal with this person on a weekly basis for 4-6 months.

If you have any questions on getting your home sold whether you're an agent or a home owner feel free to comment below.

Seller's Tip of the Week: Simple DIY Project to Boost Your Home's Value

Pergo Laminate Flooring

When it comes time to put the for sale sign in the front yard of the house you've spent some of the best years in your life in, you must consider what homebuyers are looking for in this market. If you've lived in your home for 20 years and haven't changed a thing, chances are the buyers in today's market will make note of some of the small nuances that don't catch your eye.

Buyers aren't going to place the same sentimental value on things such as your old trusty oven which has been alive and kicking for 20+ years or the rug in the living room that you proudly boost has not once been replaced in 20 years. How ever great you think your rug looks in your living room, the trend today for 90% of buyers is that rugs in entertainment spaces is a big no-no, so get them out.

Here is a quick simple DIY project that you can do (yes anyone) to prepare your home to get top dollar. Pull up those old rugs in entertainment spaces and replace it with Pergo laminate hardwood floors. It's inexpensive, looks good, and will certainly provide a great return on your investment. Below I've linked some videos on how to install them, if you played with legos as a kid, you're qualified to install pergo laminate floors, they literally click into place.

Installation for Dummies
Simple Tip to Make the Project Look Professional

Buy or Rent?

Save Money and Buy a Home

Recently Business Insider published a story regarding "tipping points" of interest rates that would cause renting to becoming cheaper than buying. Nationally the tipping point of interest rates is 10.5%, so in other words interest rates would have to hit 10.5% for renting to be cheaper than buying. I'm not so sure we'll be seeing 10.5% interest rates any time soon.

Whether you realize it or not, it's more affordable to buy than rent. Granted you're going to have to save up some money first for a down payment if you do not want to pay PMI (private mortgage insurance which is typical 1% of the remaining principal balance of the loan paid every year until you reach 20% equity). However, if you are willing to pay PMI and make up for the cost of PMI in speculative appreciation (anticipation of the house gaining in value)  you can buy a house with as little as 3.5%.

Why is it more affordable to rent than buy? First and foremost, monthly payments. Generation Y (people in their 20's and 30's) has been slower to buy than their parents. Studies show that they like their flexibility and like to move around like gypsies. This increases demand for rental units which in turn leads to higher and higher rents which exceed the cost of a mortgage.

But don't you have to pay property taxes and get insurance when you buy a home? Yes, you do. Even taking into consideration a mortgage which includes PITI (principal, interest, taxes, and insurance) monthly mortgage payments still are typical cheaper on a comparable property. Here's the kicker, not only are monthly payments cheaper, you can also write-off your property tax expense and mortgage interest expense. Say for example you were in the 25% tax bracket, if you have yearly property taxes of $7,500 and a mortgage interest expense of $10,000 (yes interest is a lot in the beginning years of the loan), that's $17,500 in write-offs. Again, assuming a 25% tax bracket, that means you pay $4,375 less to uncle sam simply because you own a home.

To summarize, let the gypsies rent. If you have enough money saved up where you're comfortable to lay out a down payment of 20%, do it.

Today, we're going to piggy-back off my last post about interest rates going up to show you the correlation that it has with housing affordability.

It's not exactly breaking news for me to tell you that when interest rates go up your monthly payments go up as well. However, let me just show an example of the difference in home affordability had you bought a home just a couple of months ago when interest rates were at 3.5% vs. the 4% that are currently showing this hour.

I'll once again use our friends at bankrate.com to explain this example. If you were in the market to buy a $500,000 home (let's assume you put 20%/$100,000 down) just a few months ago when rates were at 3.5%, the monthly mortgage cost on a 30-year fixed rate mortgage (not including taxes and insurance) would have been $1796. Fast forward to this hour where interest rates are roughly 4.0% and that same $400,000 mortgage now has monthly payments of $1910.

But here's what really stands out to me, for the monthly payment of $1910 that you will now be paying on a 30-year fixed rate mortgage if you take the loan out this hour, just a few months ago when rates were 3.5% you could've gotten a loan for $425,000 for the same monthly payments of $1910. In other words you could've qualified for a house worth $25,000 more for the same monthly payment! Or another way to view it is that you could have put $25,000 worth of your own improvements/customization into the home for the same price!

With interest rates only going up from here, get the most bang for your buck and make that move you've been pondering ASAP

Next time, we'll talk about renting vs. buying.

Interest Rates Steadily Climbing

(Interest rates bottomed out in late 2012)

Since Ben Bernanke hinted in early June that the fed will look to begin cutting back on QE, interest rates have slowly yet steadily been climbing. Now what does this mean for us average Joes? This could mean one of two things. First, this could mean that buyers are going to begin backing off due to record low interest rates slowly going away. But, more likely what we'll see is that buyers will come out in troves to take advantage of these rates while they're still near all-time lows.

Here's a hypothetical example to think about for a second. Say you were to buy a $500,000 home, you put down the typical 20%, so you're putting down $100,000 in turn leaving yourself with a $400,000 mortgage. Still with me?

Now, according to the BankRate.com mortgage calculator, if interest rates were to go up just 1% from where they are today (which some economists are predicting) that is a difference in about $85,000 over the course of that loan or about $230 more in monthly mortgage payments and that's where you are REALLY feeling it, right? Because that's the money that's coming out of your pocket every single month. Just a little side note here but my sister's 2012 Honda Civic has monthly payments of $199, so we're talking the difference of more than an entire car payment here.

Moral of the story is if you're hesitating to sell your home because you want to see it appreciate a little bit more before selling, you're making a bad choice. Because although your home is appreciating in value, your replacement is as well so that all evens out. But you HAVE TO take into account the effect that mortgage interest rates rising are going to have. Essentially the longer you wait to sell it's only going to cost you more money in the long run, look to my example above for proof.

Next time, we'll talk about the affordability of houses changing with interest rates going up. Buyer's you're going to want to see this one.