Florence, AL Real Estate | Good Investment?
While at a closing last week I was speaking to a couple who was purchasing some Florence, AL real estate to build their home on. Our conversation moved towards accumulating and investing money. They were of the mind of investing their money into CD’s and interest bearing accounts which is a very safe and smart thing to do. But, as of this writing these types of investments pay very poorly with inflation almost exceeding your moneys growth. Upon learning their investment ideals and understanding I suggested that they look into investing into some Florence, AL real estate.
Here’s some of my quick and simple suggestions to Florence, AL real estate investing. These are a few things I’ve learned while acquiring real estate over the past 11 years.
Florence, AL Real Estate | Multifamily Property Strategy
Invest in something that pays a return either now or over the life your Florence, AL real estate. I suggest multifamily property. Why? Because everyone needs a place to live. Plus, your tenant pay your mortgage and pays into your future retirement.
For example. Say you find a $55,000 home near the University of North Alabama, which is prime Florence, AL real estate for those attending college. You can expect to put down about 5% to buy the home. Here’s how it works:
Purchase Price: $ 55,000
Down Payment: $ 2,750
Financed: $ 52,250
Monthly Payment: $ 407
Including Property Tax and Insurance: $ 457
Market Rent: $ 575
In Your Pocket: $ 118
Yearly Gross Income: $ 1,416
This particular scenario allows for a positive cash flow. Having a positive cash flow allows for you to either make:
1. Extra payments to your loan
2. Money for repairs and maintenance
3. Extra spending money
Florence, AL Real Estate | Tenant Builds Equity + Property Appreciation
REMEMBER! This allows the tenant to PAY YOUR MORTGAGE while you BUILD EQUITY in your Florence, AL real estate. ALSO, while the tenant is building the equity in your property, you’re able to recognize appreciation in the properties value.
Let say that in five years your Florence, AL real estate value has appreciated to $60,500. How much equity do you have in the property?
Property Value: $ 60,500
Loan balance: $ 39,000
Equity: $ 21,500
You would have made $21,500 for an investment of only $2,750. Thats a very reasonable return on your Florence, AL real estate investment. Much better than a CD or interest bearing account. PLUS, you get to depreciate the value of the home over a period of time set by the IRS. Here’s how depreciation works in very simplistic terms:
Purchase Price: $55,000
Yearly Depreciation Amount: $ 2,000
Say you net $1,416 at years end, not including your principal payments, this is what your net would look like to the IRS.
Gross Income: $ 1,416
Depreciation: $ 2,000
Net Income: $ – 584 NEGATIVE
Florence, AL Real Estate | When A Loss Can Be A Gain
You may think, why would I want to loose money on my Florence, AL real estate investment? This is only a loss on paper and not in your pocket book.
The IRS looks at and treats a properties depreciation as an expense. Which means this yearly depreciation amount of $2,000 will be written off at the end of the year which means less tax dollars out of your pocket. These dollars can be used to improve your piece of Florence, AL real estate or even begin looking for another property.
This particular scenario does not take into mind the recapture of a properties depreciation upon its sale or raising your rents over the life of the property. That’s a completely different conversation.
This information is based on my opinion and experience only. There are multiple situations and scenarios that can come into play while investing in Florence, AL real estate. Thats why I suggest you consult with a professional who’s done this type of investing before, specifically one who makes his or her living doing it, and even more so, if their expertise in in Florence, AL real estate.
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Today I got to meet with a client that I’ve been working with for about two weeks. She initially had called about a house that my construction company, Bobo Builders, had built in Heathrow in Florence, AL. Having had time to get to know her situation I found that she would need to rent for the first six months to a year until they could get their financials in order. Anyway, while meeting with her today she gave me some excellent information and insight into a mortgage assistance group called NACA (Neighborhood Assistance Corporation of America). This is what I’ve learned thus far:
This is what NACA is providing to those who follow their program:
Purpose: Purchase, Purchase & Rehab and Refinance
Down Payment: NONE
Closing Costs: NONE
Interest Rate: One to five percent below market
Buy-Down: Additional funds can reduce the interest rate.
Application Fee: NONE
Points & Fees: NONE
Credit History: Perfect credit not required
P. M. I. : NONE
Membership Fee: $50 per month for five to ten years. This applies to those who have closed a NACA mortgage. Time period for payments depend on mortgage amount.
NACA even says it sounds to good to be true. NACA says it’s committed to providing these services to those who have low-to-moderate income, areas or communities that need an increase in home ownership or those who have difficulty in obtaining affordable or reasonable loans. This pretty well sums up most of America if you consider the last one; difficulty in obtaining reasonable or affordable loan products. They say there program has ten steps to follow. They are as follows:
Ten Steps To Owning Your Own Home
1) Home Buyer Workshop – Attend a homebuyer workshop.
2) NACA Qualification – A mortgage consultant helps to prepare you financially for home ownership.
3) Housing Search – Find an agent to work with who will help you find a home that fits you financial situation.
4) Purchase and Sale Contract – have it approved by NACA staff or mortgage consultant prior to signing.
5) Property Inspection – The home inspection is reviewed and approved by NACA.
6) Property Renovation – If needed.
7) NACA Credit Access – Provide updated financial information to NACA.
8) Mortgage Processing and Underwriting
9) Mortgage Closing
10) Post-Purchase Program – counseling provided through MAP.
For more information on NACA visit www.NACA.com or call 1-888-302-6222. I hope that you’ve found this information to be helpful. Hopefully NACA will help America retain and secure the dream of home ownership for those who are financially responsible.
To view homes in Florence, AL click:
Today has been a somewhat busy hump day in the life of a Realtor in Florence AL. It all started last night about 11:30 pm when I couldn’t fall asleep. As always, I plan my days out ahead of time but last night I planned about every minute I could plan out for today. WOW! The amount of things you can do by planning ahead! Here’s how it turned out:
8:15 – 8:25 am – Breakfast
8:30 – 8:35 am – Order Title work for Castleton closing
8:40 – 9:00 am – File paperwork with administration in Montgomery
9:00 – 9:30 am – Closing @ Alabama Land Services
9:40 – 9:45 am – Confirm rental showing with landlord for tomorrow
9:50 – 10:00 am – Deliver update to buyer about contract status. Confirm email receipts.
10:05 – 10:15 am – Confirm rental showing with future tenant for tomorrow
10:20 – 10:45 am – Login to ActiveRain. Work on Blog
11:00 – 11:15 am – Call lake house owner about potential buyer/renter
11:30 – 12:00 am – Review rental reports for apartment complex
12:00 – 12:30 pm – Lunch
12:45 – 1:00 pm – Call Buyer about lake homes for sale not listed on the Multiple Listing Service
1:00 – 1:15 pm – Call potential Seller about selling their home. Set up time to meet.
1:30 – 2:00 pm – Meet Sellers parents at house to pick up remaining belongings.
2:15 – 2:30 pm – Meet painter at absentee owners home to paint/repair maintenance issues
2:30 – 3:30 pm – Gym
3:30 – 4:30 pm – Return missed calls while at the gym. Confirm tomorrows appointments.
4:30 – 5:15 pm – Wrap the day up and get ready to go home.
Of course I gotta leave time throughout the day to field calls and unexpected meetings. This is what I do and I love it for some weird reason. It’s all I know. Maybe I should eat breakfast earlier.
Today, I’m helping a new friend prepare to close a property that needed IMMEDIATE attention, according to her. This is how it all came together……………
Last Wednesday I got a call from a duplex owner in Florence, AL expressing interest in selling her property. We spoke of the services that my company, Bobo Real Estate, offers but she wasn’t interested in my assistance in selling it for her. She wanted to know if I would be interested in buying it. I told her that I’d like to see the property so we arranged to met the next day, Thursday, and preview the duplex. The duplex was nice but there were some cracks around the crawl space which told me there might be some foundation issues. Later that evening we agreed on a price with some inspection contingencies and agreed to close on the property the following Wednesday.
She was SO EXCITED that she didn’t have to worry with this place anymore. She told me how big of a pain in the neck this place had been and at her age she didn’t need the worry anymore. After leaving, I immediately started calling to order what needed to be done before closing like termite inspection, title search/insurance, inspection, etc.
The termite inspector has the inspection scheduled for Friday morning. Later Friday evening I get a very urgent message from the inspector letting me know they need to speak with me immediately. Expecting termites, I return their call. The inspector tells me that not termite infestation is present but we have MOLD and MOISTURE issues in the crawl space and that it’s going to cost $1600 to rip the old insulation out, spray the mold and lay down a new 4 mil poly to replace the old. This would get rid of the mold but still wouldn’t guarantee it’s return nor would it cover the cost of the insulations replacement. The seller calls, after speaking with the termite company, very worried that the deal will fall through. Having seen these issues before I felt comfortable moving forward with the sale and assured her there was nothing to worry about.
Saturday morning I met a foundation specialist on the property to make certain I wasn’t getting in over my head in foundation repairs. The inspector quickly notes that the crack are major and starts to work. After inspection he says it’ll cost around $25,000 to remedy the issues. WOW! $25,000 worth of foundation issues?!?! Really!?!? Once we left inspection I called the seller to see if I could come by and talk about what we found. She asked if something was wrong and I said I’d like to speak with her in person about the inspection.
Later that evening I meet with the seller to let her know that I was no longer interested in buying the property but that I felt like I could find a buyer for her property, even with the existing issues. She immediately started crying! What do I do? After long reassurance that everything would be okay, she still wants me to take the property. “Make me and offer” she says. “PLEASE, just take it. I don’t want it” she begs. There’s NO WAY I’m going to TAKE real estate from anybody, no matter what the issues. I reassured her not to worry and that I’d work hard to find her a buyer. She eventually agrees and said “What are you waiting for? Pick up your phone”.
So here we are today and its Tuesday, two days later and we’re getting ready to close tomorrow morning. We FOUND a BUYER and she didn’t get ripped off! Of course, we disclosed the MAJOR issues and still FOUND a BUYER! I felt terrible for this lady Saturday evening. She felt like she was cornered by her own property with no way out. I know that tomorrow morning is going to be a GREAT RELIEF for her. As she said “A huge burden has been lifted off my shoulders”.
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