Daily Archives: September 22, 2012

Using an FHA 203(k) loan to buy a college-town rental | Chappaqua NY Real Estate

Using an FHA 203(k) loan to buy a college-town rental

Student-landlord can play key role in financing

By Tom Kelly, Wednesday, September 19, 2012.

Inman News®

<a href="<a href=Mortgage financing image via Shutterstock.

Foreclosures and short-sales still make up a significant portion of the housing market. In fact, in some areas, distressed properties make up more than one-third of all recorded sales.

What if you were to find one in the college town where your child plans to spend the next several years of her life? What if you turned a dilapidated, community eyesore into a college rental that could serve as an alternative to dormitory living for your kid, then as a long-term housing resource for faculty and staff once she has moved on?

In a recent column, I discussed how the first question regarding a college rental is the maturity of the child/student living in and managing the property. Could she handle the responsibility and choose roommates who would not continually party and upset the neighbors? There’s a reason why local residents do not live near fraternity row and they are not happy when other homes with fraternity-like hours and behaviors suddenly pop up on their once-sleepy block.

However, let’s assume for a moment that all the stars are aligned — your kid really has her head on straight and you found a fixer-upper on a safe block where she could walk or bike to campus. With today’s low interest rates and attractive loan programs, it might make sense to do the research and see what’s possible.

In the example I used in a previous column, let’s say you found a home in a college town that cost $275,000. You would make a down payment of at least $27,500. If you finance the remaining $247,500 at an interest rate of 4 percent over 30 years, your principal and interest payment will be about $1,186 a month. Toss in taxes, fire insurance and a few light bulbs, and you will be looking at $1,300 a month — certainly doable for four mature roommates.

  

Related article:
When investing in a college rental makes sense

  

Loans insured by the Federal Housing Administration (sponsored by the U.S. Department of Housing and Urban Development) permit expanded guidelines, such as loan-to-value ratios. More importantly, FHA allows for children to remain on the title as owner-occupants, even though the parents supply the down payment and are the actual purchasers.

One of the creative programs is the FHA 203(k), which was designed to roll all financing into one package. The borrowers can take out one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property. The mortgage amount is based on the "as will be" (projected) value of the property and takes into account the cost of the work.

"Remember the FHA 203(k) is a program that is limited to owner-occupants," said Mark Palmer, vice present of loan production for Seattle Mortgage. "With the children on title and living in the property, it will work."

Let’s say a run-down house near a university is priced at $80,000 and needs $20,000 in repairs. The parents, as non-owner-occupants, would probably have to pay 15 percent down, or $15,000. An appraiser estimates that the house will be worth $130,000 after the work is done.

Enter the child as co-owner and landlord. The bank says based on the $130,000 appraisal, it will lend $123,750 to a qualified buyer. The kid and parents qualify for the FHA 203(k) because the child is viewed as an owner-occupant.

"The child-landlord could obtain the down payment from all gift funds from the parents," Palmer said. "The down payment required would be 3.5 percent of total acquisition cost — base purchase price plus the rehab funds."

Another piece that goes into funding the 203(k) transaction is a 10 percent holdback on the amount of the rehab funds. So, $20,000 in repairs means $2,000 would be held back. According to Palmer, if all the work stays on budget and schedule (both of those elements are very important) the money will come back to the buyer after the last draw is taken and the release of mechanic’s liens is obtained.

So, in some-fixer-upper situations, student co-owners can play a key role in securing creative financing.

Tom Kelly’s new e-book, "Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico’s Lower Cost of Living Can Avert a Tearful Retirement," is available online at Apple’s iBookstore, Amazon.com, Sony’s Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions. 

                                         

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Copyright 2012 Tom Kelly

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.

Impact driver’s high torque ideal for long screws, bolts | Pound Ridge NY Real Estate

Impact driver's high torque ideal for long screws, bolts

Power drills have tendency to shear off screw heads

By Paul Bianchina, Friday, September 21, 2012.

Inman News®

<a href="<a href=Impact driver image via Shutterstock.

You no doubt already have a cordless drill/driver in your home or shop, and have come to really appreciate everything these highly versatile tools can do, from drilling holes to driving a wide variety of fasteners. But you may have also come across a few of their limitations as well. Most lack the raw power for driving large fasteners like lag bolts. And their high rotational speed can shear off screw heads at the most inconvenient times, especially when fastening long screws or working with harder lumber.

The solution might be to add an impact driver to your arsenal of cordless tools. An impact driver probably won’t replace your cordless drill, but it certainly provides a great complementary tool for a number of different tasks.

So what’s the difference between a drill and an impact driver?

A drill utilizes a motor to provide rotational motion only. In order to drill a hole or drive a screw, you need to provide the strength against the drill to keep the bit in contact with the material or the fastener.

With an impact driver, you still have a motor initially turning the chuck, and when there’s little resistance against the bit, the impact driver works pretty much like a conventional drill. But when the bit senses resistance, the impact driver automatically changes modes, and an internal hammer and anvil mechanism engages. This slows the chuck’s rotational speed, but applies a great deal more torque (rotational force), so you can drive long screws or bolts with considerably less effort and with less chance of shearing off the heads. The typical impact driver provides about three to four times as much torque as a conventional drill of the same voltage, in a smaller and lighter package.

So with all that, are there disadvantages to an impact driver? A few. For one thing, they’re noisy. When they switch to their impact mode — which, by the way, they do without warning — they make a loud and somewhat irritating noise (think about those wrenches in a tire store), so you need to be wearing hearing protection.

Another disadvantage is that impact drivers have a 1/4-inch hex chuck, not a conventional chuck, so you can only use hex bits in them. Most screwdriver bits and bit holders are this size, so that’s not a big deal. However, if you want to drill holes, you’ll need to invest in drill bits with a 1/4-inch hex shank on the end.

Finally, expect a bit of learning curve with an impact driver, especially if you opt for one of the higher voltage ones. Because the impact mode kicks in unexpectedly, and because of the high torque, you need to get a feel for these tools. However, that’s not especially difficult, and you’ll find the trade-offs are well worth it especially if you have a big outdoor project like a new deck to tackle.

Shopping for an impact driver

As with cordless drills, the best way to buy an impact driver is in a kit, with a charger, a couple of batteries, and a storage case. If you’re in the market for both an impact driver and a drill/driver, you can get some great combo kits that have both and save even more money.

Many kits come with a choice between standard 1.5-amp-hour (AH) and extended-run 3.0 AH batteries. With the extended-run batteries you’ll be able to work longer between charges, but the trade-off is a higher initial cost and more battery weight. With a two-battery kit and a 30-minute fast charger, you may or may not find the extended-run batteries worth the extra investment.

Here are two professional-grade kits that are well worth considering, with their approximate retail kit prices:

DeWalt 20V Max 1/4-inch 3-Speed Impact Driver (Model DCF895C2 w/2 1.5 AH batteries, $279; Model DCF895L2 with two 3.0 AH batteries, $349): This tool has a nice, comfortable rubber-molded grip, with protective rubber pads where you set the tool down. It has a brushless motor for longer life, and a battery fuel gauge. The chuck has a nice push-button release for one-handed accessory changes, and there are three LED lights around the chuck for great visibility.

It features three speed/torque ranges to match the material you’re working with: 0-950 RPM and 500 inch-pounds of torque; 0-1,900 RPM and 900 inch-pounds; and 0-2,850 RPM and 1,500 inch-pounds. Tool length is 5 1/4 inches, weight is 3 pounds. The complete kit includes the impact driver, fast charger, two batteries, reversible belt hook, accessory storage clip, and hard-shell case.

Milwaukee M18 1/4-inch Hex Impact Driver Kit (Model 2653-22CT w/2 1.5 AH batteries, $229; Model 2653-22 with two 3.0 AH batteries, $299): The tool fits nicely in your hand, with a nonslip grip and rubber cushioning. There’s a bright, trigger-activated light, and the mode selection is done with a convenient button rather than a switch, with a light to indicate the selected mode. The batteries also have a lighted, push-button fuel gauge.

This impact driver also has three speed/torque modes, so you can compare the two and see which ranges might work better for you: Milwaukee’s is 0-850 RPM and 200 inch-pounds of torque; 0-2,100 RPM and 700 inch-pounds; and 0-2,900 RPM and 1,600 inch-pounds. Tool length is 5 1/2 inches, and weight is 3 pounds. The complete kit includes the impact driver, fast charger, two batteries, reversible belt hook, and hard-shell case.

Milwaukee 35-piece Impact Drill and Drive Set (Model 48-32-4402, $29.97): The high torque of an impact driver can twist and shear standard bits and sockets, so you really need to invest in the right bits to accompany your new impact driver. Milwaukee, for example, offers a beautiful set at an affordable price that’s specifically engineered for use with impact drivers. This set gives you five drill bits, three nut drivers, two socket adapters, two long screwdriver bits, and a bit holder with several different screwdriver bits, all in a nice fitted case.

Remodeling and repair questions? Email Paul at paulbianchina@inman.com. All product reviews are based on the author’s actual testing of free review samples provided by the manufacturers.

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Copyright 2012 Paul Bianchina

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.

Rising prices will drive housing sales for years to come | Bedford NY Real Estate

Rising prices will drive housing sales for years to come

Commentary: Forget inflation — we're still in the global deflation event of all time

By Lou Barnes, Friday, September 21, 2012.

Inman News®

<a href="<a href=Housing market trends image via Shutterstock.

The market response to QE3 has been different than to the first and and second rounds of "quantitative easing." It’s subdued this time.

The initial upward burst in stocks has fizzled, and the run to commodities by those either fearful of inflation or hoping for it has also stalled. The 10-year Treasury note jumped almost to 1.9 percent from summer in the 1.5s, but has now retreated to 1.75 percent.

Only mortgages have behaved as expected, sitting at or slightly below the 3.5 percent all-time low, depending on the deal.

The usual weekly run of data on the current economy shed no new light, but deeper reports on credit and housing did enlighten, as did — may the saints preserve us — news from domestic politics.

Republican columnist David Brooks this week nailed Mitt Romney as behaving like Thurston Howell III, the clueless ascot-throated boob of "Gilligan’s Island." Romney had done poorly while cast as a Wall Street sharpie. Boob is fatal.

Measured by the flow of campaign money, businesspeople have been the largest (only?) segment of the electorate to depart Obama for Romney, and I doubt they have processed Obama’s now likely re-election. What impact might awareness have on expansion and hiring?

A hint at an answer overseas: After his inauguration on May 15, new French President Francois Hollande proposed to cut the 2013 budget deficit by 30 billion euros, about 1.5 percent of GDP. The cut will be funded one-third by spending cuts, one-third by new taxes on business, and one-third by taxes on the rich. Since the announcement, new business in France has suffered its largest drop since the free-fall in 2009.

Every 90 days the Fed releases Z-1, its compilation of every nickel rolling and landing in the U.S. economy. Some good news: The net worth of U.S. households is today only $3.5 trillion below its 2007 level, and up $9 trillion from its 2008 nadir. But 80 percent of the gain has been from stocks, a paper loss and rebound. Home values are still rumbling along bottom, little changed from the initial $7 trillion loss.

Household liabilities have fallen more than $1 trillion, all in the mortgage account. Second mortgages (all types) at first fell slowly from $1.1 trillion in 2007, the pace now accelerating (via foreclosure and short-sale wipeout), down to $813 billion. Trash mortgages crested at $2.2 trillion in 2007, and this fall will drop below $1 trillion.

Mortgages guaranteed by Fannie, Freddie and FHA/VA have been remarkably steady at $5.8 trillion. That pattern requires some thinking. The Fed has bought $1 trillion. The refi churning is a null set. Amortization knocks down the balance, but not much.

Loans for home purchase add to the account, but only as they exceed payoffs from sales. There is no alternate supply of mortgage credit. Those who dream of privatized mortgages might glance at another Z-1 line: Banks have dropped first mortgage holdings by 20 percent since 2007, the remainder only 43 percent of the government-sponsored sum.

The apparent stability in home-mortgage balances overall, outstandings down only from $11.2 trillion in 2007 to $10 trillion today, is misleading.

By all accounts some 20 percent of the remaining balances are underwater. They present both as a future loss and an inert supply not available for new transactions.

The actual, in-practice decline in supply has been on the order of 35 percent, and trying to get a new loan from Fannie makes all borrowers and mortgage bankers themselves feel like new-age Willie Suttons.

Nevertheless, prices of homes are beginning to rise. Some of the rising news is statistical artifact.

The National Association of Realtors reports that the distressed fraction of sales of existing homes fell to 22 percent last month, down from 49 percent in 2009. No matter how analysts try to adjust prices for distress, fewer of those homes selling unquestionably makes price increases look better than they really are for individual homes.

Ignore my quibbling with stats. The one, single patch of sunshine in this economy is prices of homes rising to any extent. Every dime up is a dime less underwater.

And the 5 percent miracle approacheth. Five percent appreciation means that I can at last hire a broker and roll my equity into the new place I’ve needed for years and years. That’s how housing sales numbers will rise, probably for a long time ahead.

QE3 has awakened the inflation worrywarts, led by Richard Fisher, the braying jackass at the Dallas Fed (some of my family are Texans, but not even they can explain why so many down there are compelled to act out the stereotype).

The worriers might spend more time studying data than talking. We are in the global deflation event of all time, inflation itself rolling over again into the danger zone.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

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Copyright 2012 Lou Barnes

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Decoding Common SEO Acronyms | Cross River NY Real Estate

Is it just me, or does it seem like technology has a language of its own? There are so many abbreviations and slang terms for various online marketing actions that it’s difficult to keep track of what means what. This is especially true when it comes to SEO, or search engine optimization.

Much is made of how you can boost your search engine presence and get that coveted spot on page one of Google. Many of you may already know about the tactics you can use already. What gets confusing are these online marketing acronyms that get thrown around. You see them and think that you’re not doing something right. In reality, you may already be doing them!

If you take some time to decode some of these fancy-looking SEO acronyms, you may find that understanding Internet marketing lingo isn’t as difficult as you think. Here are a few common abbreviations that you may see:

SERP: Search engine results page. The objective in all of your Internet marketing and SEO efforts is to get on page one of all the major search engines.

PPC: Pay-per-click. You know those Facebook ads you can create and place? Those are pay-per-click ads. You pay a certain amount for each click your ad receives.

PR: PageRank. Did you know that Google actually rates your website? It gives your site a score on a 1-10 scale based upon the quality of its content and inbound links. This figure, known as PageRank, can be used to track the progress of your SEO marketing efforts.

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CRO: Conversion rate optimization. Believe it or not, the number of call-to-actions that you have on your site matters. Having call-to-actions and lead-capture forms throughout your site is the way to convert visitors into leads. The more this happens, the higher your conversion rate optimization.

SEM: Search engine marketing. This all-encompassing term refers to any and everything that you do to get your website to move up the search engine rankings. From blogging to pay-per-click ads, to call-to-actions; each of these efforts can be attributed as SEM techniques.

Once you break it down, the concept of Internet marketing doesn’t seem so scary, does it? Chances are, you’re already thinking about these things when you plan your next marketing move. Decoded, these SEO acronyms aren’t scary and intimidating. Now you can read about SEO strategies and tactics and actually know what the experts are talking about. You can spend less time trying to decode what’s being said and more time coming up with a brilliant marketing strategy for your website.

Hopefully, this cheat sheet of terms brings you one step closer to mastering the tech lingo surrounding SEO strategy.

Good luck!