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Study Examines Fairground Potential

The North Florida Fairgrounds could be a major economic engine if it’s redeveloped for more indoor sports and regional shows, a new feasibility study suggests.

On Tuesday, county commissioners discussed the merits of a Market and Financial Feasibility Study Report prepared by Markin Consulting. The study recommends $15 million in upgrades and development toward the Fairgrounds, located at Paul Russell Road and Monroe Street.

 

Catch the rest of the story @ Tallahassee.com

Congrats to This Month’s “1st of the Month” Raffle Winner

The Landlords the Sealey Team work with are regular folks. They range from single mothers, young adults, retirees and small business owners. These individuals have a home for themselves but take the leap of faith to embark in providing a home for someone else.  Sure, in the long run they hope to make a return on their risk and investment but starting off bite their fingers hoping they can make it through.

When the 1st of the month rolls around we like to reward tenants that understand that and pay their rent when it’s due, on the 1st.  This month we would like to congratulate our tenant on Keith St who won this month’s raffle. She will take home a Gas Gift Card!

4 ways to Invest in Real Estate

Investing in Real Estate has become increasingly popular. Below are 5 basic approaches to investing:

1. Become a Landlord:
This is the simple and straight forward approach that most people take. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage (according to the U.S. Census Bureau, real estate has consistently increased in value since 1940), leaving the landlord with a more valuable asset.

2. Join a Real Estate Investment Group
These are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company (thus joining the group). A single investor can own one or multiple units (self-contained living space), but the company operating the investment group collectively manages all the units – taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

3. Real Estate Trading/Flipping
This is the wild side of real estate investment. Like the day traders who are leagues away from a buy-and-hold investor, the real estate traders are an entirely different breed from the buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time (often no more than three to four months), whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.

4. Real Estate Investment Trust or REIT
Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust(REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

Depreciation & Crunching Numbers

Depreciation

When you own property, each year you write off costs for money you expend where the cost is a one-year expense, such as gardening, general maintenance, repairs and HOA fees. But what if the cost is for an improvement such as a new kitchen or new sidewalks? Because those costs have a useful life beyond one year, you must “capitalize” and depreciate those costs. That means you divide the total cost by the useful life of the improvement, and write off 1/nth of the cost per year. For example, you do $15,000 worth of driveway and sidewalks, with a 15-year useful life, so you can write off $1,000 per year ($15,000 divided by 15 years).

The biggest capital asset of any property is the actual purchase of the house. When you buy a rental property and will own it for longer than one year, you can depreciate the structure. First you must divide the purchase price of the property between the land and the building. You can use your tax assessor’s estimate of the cost of each of those components, an appraisal or an insurance agent’s estimate of the cost of the building. Either way, you can only depreciate the building, as theoretically the land portion of your purchase price is not “used” up and cannot be depreciated.

Crunching the numbers

Here’s an example: Let’s say you buy a single-family home for $200,000. The tax assessor’s estimate of the land value is $75,000, and the building value estimate is $125,000. Your depreciation expense that you take each year against rental income would be $125,000 divided by the IRS allowed 27.5 years of useful life (residential real estate) for a depreciation expense each year of $4,545. So thanks to that depreciation expense, you are saving (assuming you can use passive activity losses) $4,545 multiplied by your marginal tax rate (which is a topic for another day). This could be tax savings from $1,000 to $2,000 per year, just for the depreciation amount.

The calculation and write-off are pretty straightforward, but the actual tax savings amount gets a little more complicated. Many people flub this calculation from the start, so it’s best to find a licensed tax professional and start saving some money going forward.

The Planet Of The Raccoon

We rarely notice these usually-nocturnal animals, except during the summer when they are working overtime to feed their new families. There’s nothing more disgusting than to wake up and see that your trash can lid has been opened up and all of your trash bags torn apart by the scavenger of the night looking for food.

Can we trap and relocate them? Florida law is clear about relocating “nuisance” wildlife: The animal (1) must have caused actual damage or pose a real threat of causing damage and (2) be relocated within the same county on private property of at least 40 contiguous acres. (3) You must also have written permission from the landowner.

So what can you do? Luckily Sandy Beck,education director for St. Francis Wildlife, wrote a short piece at the Democrat of a fee rid bits if what you can do.

To read the full article and find out what you and neighbors can do click the link below:
http://www.tallahassee.com/story/life/home-garden/2014/07/31/discourage-neighborhood-bandits/13417357/

TLC Down Payment Assistance

Buying a home regardless of what the media says is still the American dream. Despite stricter regulations there are still resources available to help individuals in deed of closing and downpayment assistance.

The Tallahassee Lenders’ Consortium (TLC) provides down payment assistance from the City of Tallahassee to first-time home buyers like you.

Down payment assistance through TLC can pay for down payment, prepaids and all other buyer’s closing costs up to $7,125 for homes purchased in the City limits. If the client is in the very low-income category, down payment assistance can be expanded to $12,050 for homes purchased within the City limits, if needed. The loan is secured by a second or third mortgage loan at zero interest and no required payments. The loan is due and payable upon 1) sale, transfer, bankruptcy or foreclosure, 2) refinance of the first mortgage, 3) the borrower no longer occupies as primary residence or 4) maturity of first mortgage (not more than 30 years).

This is just one of several options on the market. In the future I’ll discuss the others.

Red Flag in Background Check

Run enough applications and it’s not too uncommon for a prospective tenant to come looking for a rental and when we run our background check something negative appears on their criminal history. Let me be honest and say that YES, those do raise up a red flag however it doesn’t NECESSARILY mean the end of your home rental hopes.

For starters you’ve got to understand that accepting a tenant in one of our houses means that we will be dealing with each other for an entire year. Actually in reality it’s not just us but the neighbor to your left and right (sometimes top or bottom) and the entire surrounding community have to deal with you. For this and many more detailed reasons it’s important that we believe that we have great individuals moving in.

To be fair we understand that people change, circumstances come up and mistakes do happen. If that generally is you this is how you can give yourself the best shot of landing a pad:

1. Be upfront about it-You know going in that a background check will be done so go ahead in the beginning and share that information while provide supporting documents showcasing how that was a one time occurrence. Did you get in a bar fight? Well show that you went to anger management, volunteer and have references for the choir director (or something) that you’ve been dependable…which leads to part #

2. Bring documentation-not to reiterate but bring documentation of how you’ve turned Right at the fork and stayed on it. References are more important that anything here and we don’t mean just your mom or girlfriend. We want to hear from your boss, your church or the place you volunteer at.

Hopefully this helps someone on their next application process.

Renter’s Insurance: Protect Yourself

I strongly advise all Tenants to obtain renter’ insurance for their personal property, personal injuries occurring in the Premises, and/or other damages that may occur.

Renter’s insurance provides you with coverage for loss damage, or destruction of your property. It may also provide coverage for additional living expenses you may incur if your Premises becomes uninhabitable. Such insurance can also protect you from any liability claims resulting from your own activities. For example, if your negligence causes fire, you may be held responsible for the damage of the property of others, including Owner’s property. Similarly, if a guest were to have an accident in your apartment, you could be personally responsible for the guest’s injuries.

The cost is usually around $10/month so the minimum expense is worth the headache relief. Consult with an insurance agent to review your personal needs.

HELP!!! I Need Money To Rehab A Property

Even in this market, a house that looks great and priced right will sell with multiple offers. The truth is the best deals on the market are the ones that nobody else wants. The idea of buying a fixer-upper and turning it into your dream pad can seem so perfect — every nook and cranny just to your specifications! When looking at the price of construction the reality can be harsh and often you realize that you can’t afford it and the lender won’t give you a loan because the home is considered “uninhabitable” as it is. This is where an FHA 203k loan comes in.

An FHA 203k loan is a loan backed by the federal government and given to buyers who want to buy a damaged or older home and do repairs on it. Here’s how it works: Let’s say you want to buy a home that needs a brand-new bathroom and kitchen. An FHA 203k lender would then give you the money to buy (or refinance) the house plus the money to do the necessary renovations to the kitchen and bathroom. FHA’s Streamlined 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser. Homeowners can make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior or purchasing new carpet.

The maximum amount of money a lender will give you under an FHA 203k depends on the type of loan you get (regular vs. streamlined). With a regular FHA 203k, the maximum amount you can get is the lesser of these two amounts: 1) the as-is value of the property plus repair costs, or 2) 110 percent of the estimated value of the property once you do the repairs. With a streamlined loan, you can get a loan for the purchase price of the home plus up to $35,000. To determine the as-is value of the property or the estimated value of the property post-repair, you may need to have an appraisal done. You will be required to put down 3.5 percent, but the money can come from a family member, employer or charitable organization.

So you’re an investor? Well you’re in luck because there is a program for you as well. HomeStyle Renovation Mortgage provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 50 percent of the as-completed value of the property with a first mortgage, rather than a second mortgage, home equity line of credit, or other, more costly financing method. The funds can be used for any repairs or renovations that are permanently affixed and add value to the property. Eligible borrowers include individual home buyers, investors, nonprofit organizations, and local government agencies.

Feel free to email me if you need any assistance navigating these programs.

Investment Foundation: Cash Flow

Cash Flow = NOI – Debt Service

Cash flow is equivalent to NOI adjusted for the expense of debt service. Specifically, cash flow is the NOI minus the debt service payments. As might now be obvious, cash flow is the total profit you will see at the end of the year from this property. As is also probably obvious, the higher your debt service payments (the larger your loan, higher your interest rate, or shorter your amortization period), the smaller your cash flow. If you pay all cash for a property (don’t take any loan), your cash flow will equal the NOI – this is the maximum cash flow on the property.

Lets assume:

Monthly debt service= $2049

NOI = Income – Expenses

= $48,350 – $11,500

= $36,850 (the property generates $36,850 per year)

Judging by our financing data, our monthly debt service would be $2049 on this property, and therefore our annual debt service would be $24,588. For this property, our cash flow would be:

Cash Flow = NOI – Debt Services

= $36,850 – $24,588

= $12,262 (annual cash generated)

So I know what you’re thinking:

Sealey, paying all cash will minimize my debt service (it would be $0) which would therefore maximize my Cash Flow. So, if paying all cash maximizes Cash Flow, and if you have the means to pay all cash for the property, why wouldn’t you?

Great question, I”m glad you asked.…
Rates of Return

Cash flow isn’t the only important factor when it comes to analyzing the property. What is more important than cash flow is rate of return (also known as return on investment or ROI). Think of ROI as the amount of cash flow you receive relative to the amount of money the investment cost you (your “basis”)….to be continued

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