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Performance Property Real Estate Question

Real Estate Power Team Member Many Investors Overlook

Q: Gerald, I’m building my real estate team of professionals.  I already have a good real estate attorney, a general contractor and a good realtor.  Who else do you think I need? Eddie, Sparta, NJ A: Good question, Eddie. First of all, it’s a good idea to have more than one of the power team members you’ve already chosen so that you are not too dependent on any one person. Many investors, particularly in places like north jersey where attorneys do the lion share of closings often overlook one specific key player on any serious investor’s real estate power team—that’s a reliable title company. That’s a mistake, because good title companies (plural because it’s never a good idea to have […]

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Performance Property Real Estate Question

Big Mistake Contractors Make When They Rehab Homes

Q: Gerald, my husband and I recently bought our first rehab property.  My husband is a carpenter and general contractor so I’m not worried about the renovation.  Do you have any tips for us so we avoid making mistakes?  Janice, Wyckoff, NJ A: Hi Janice. Congratulations on starting your first rehab deal! In general, having a background as a contractor gives your husband a perspective on renovating that other new investors probably lack, however, the big mistake contractors often make when they buy and renovate properties themselves is over improving property–by that I mean, for example, installing custom, high-end cabinets and granite countertops in a home in a moderately priced working class neighborhood. Just because you can do something doesn’t […]

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Performance Property Real Estate Question

How Does Thanksgiving & The Holidays Affect Real Estate?

Q: How does Thanksgiving and the holidays affect real estate?  Henry, Weehawken, NJ A: A couple of years ago, traffic data on realtor.com was examined around the holidays.  Predictably, traffic was down on Thanksgiving and other holidays but the amount of the effect was mixed based on geographic region with respect to home search activity specifically.   The very interesting finding that came from that analysis was that there was a surge in home search activity on Dec 28th, New Years Day and July 6th.  The obvious conclusion to be drawn is that although home search and perhaps home buying activity temporarily slows down on Thanksgiving, Christmas & Independence Day and other holidays, it tends to pick up in a big […]

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Performance Property Real Estate Question

Is Crowdfunding A Smart Way to Invest in Real Estate?

Q: Gerald, is crowdfunding a smart way to invest in real estate? Kathryn, King Of Prussia, PA A: The main benefit that real estate investing via crowdfunding offers is undeniable–the ability to invest passively in real estate with less capital. This is undoubtedly why real estate crowdfunding has received so much attention. However, if you invest in a real estate deal that is crowdfunded, you are at the mercy of the judgment and experience of the people who buy and manage the real estate in the crowdfunded deal or deals you are invested in. The fundamentals of real estate investing don’t change because crowdfunding has ushered in another way to fund investments. As far as I’m concerned, the jury is […]

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Performance Property Real Estate Question

How Many Points Should You Pay For A Hard Money Loan?

Q: How Many Points Should You Pay For A Hard Money Loan? Jenna, Melbourne, FL. A: Hi Jenna. That’s a common question regarding hard money loans (HMLs). For starters, let’s not put the cart before the horse— it’s not about the points necessarily, it’s about the access to capital first and foremost. Make certain that you are only considering viable financing options before you begin comparing the specifics of different financing options. For example, a hard money loan that doesn’t charge any points is irrelevant to you if the lender requires you to pay 30% of the acquisition or rehab cost if you don’t have the 30%! That’s like buying an outfit for the Oscars even though you can’t get […]

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Performance Property Real Estate Question

Greatest Risk To Investors In Real Estate Markets Today

Q: Gerald, it seems like many investors always seem to miss some critical aspect of what’s happening in the real estate market.  What’s the biggest risk to investors now? Hank, Atlanta, GA A: Real estate prices have been soaring in many real estate markets nationwide.  When real estate prices go up, people get restless and careless—investors, especially builders get sloppy on price and terms.  Speculators rush in to hot real estate markets driven by the foolish notion that they can’t lose if they invest in the right market at the right time.  This is dangerous thinking that leads to dangerous behavior. The biggest risk to investors in the US today lies in not adhering to the fundamental rules of real […]

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Performance Property Real Estate Question

Should you convert your rental into an Airbnb property?

Q: Gerald, I use airbnb for lodging when I travel sometimes.  The tenant in my rental property is moving out soon–does it makes sense to convert my rental property into an airbnb property?  Kendra, Roxbury, MA A: Great question, Kendra.  Does it make sense to convert a traditional rental property into an airbnb property?  I’m familiar with airbnb because I use airbnb a lot when I travel because I prefer to stay somewhere that is more like home rather than a hotel room.  There are investors now that actually look for investment properties to buy specifically to offer on airbnb, VRBO, homeaway or other real estate app platforms. The main issue you have to recognize if you switch from a […]

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Performance Property Real Estate Question

What Every Property Owner Should Have In Their Disaster Plan

Q: Gerald, I own coastal property, how can I protect myself from natural disasters like hurricanes? Keith, Nags Head, NC A: Good question, Keith.  Having just weathered 3 disastrous hurricanes, it should be apparent to property owners everywhere that they need to have a disaster plan to protect their real estate from floods, earthquakes, hurricanes, tornadoes, high wind and manmade disasters like active shooter or terrorism. In each case, you should do 3 things in this order: 1) Identify your risk 2) Reduce your risk 3) Insure your risk. So, for example, you should assess your property’s flood risk for earthquake, hurricane, tornado, and high wind damage and then you should reduce your risk in each of those areas. For […]

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Performance Property Real Estate Question

Critical Mistake New Investors Make With Private Lenders

Q: Gerald, I want to start flipping properties, but I need to get some private lenders lined up first.  Do you have any tips you can share with me? Valerie, San Diego, CA. A: The first thing that you – or any investor –  needs to do is to identify a good, profitable real estate deal to invest in.  As far as lining up private lenders first before you do anything, that’s unlikely. “Give me money!” is not a compelling pitch to a potential private lender. In general, there are two things you need to prove to a private lender before they’re going to lend you money.  The first thing is that the deal you are investing in is secure. You really […]

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Performance Property Real Estate Question

Does Property Insurance Cover Hurricane Damage?

Q: Gerald, With all the major hurricanes that have happened this year, I was wondering if my property insurance covers hurricane damage?  Derrick, Sea Girt, NJ A: That’s a great question, Derrick. The coverage that you get for a standard homeowner’s policy varies, so you always want to check it.  But, typically it will cover windstorm damage from a hurricane for things like broken windows or a torn roof or damage from trees. Normally, a standard homeowner policy will cover those things. However, if you live in an area that’s prone to hurricanes like parts of Florida or Texas or even maybe where you are down on the Jersey shore, insurers can exclude that coverage from a standard homeowner’s policy. […]

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Performance Property Real Estate Question

A Remedy For U.S. Housing Shortage?

Q: Gerald, we are in the market for a home but it seems like every home we’re interested in goes under contract before we can even make an appointment to see it. Is this just my imagination or is there a real housing shortage? What can be done about it? Olivia, Hazlet, NJ A: Housing inventory in the US is at a 20 year low. There is no one cause – there are several causes. The main cause being that builders just aren’t building enough inventory. Other factors include: 1) high land prices 2) archaic and stifling zoning ordinances in some places 3) tight lending environment, particularly for 1st time home buyers 4) lenders reluctant to lend on condo purchases […]

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Performance Property Real Estate Question

Reason Why Real Estate Attorneys Kill Deals

Q: Gerald, I’m working on my first real estate deal with a joint venture partner. My JV partner wants us to cancel the deal because of a minor title issue our attorney is obsessing over. I asked my friend who owns a title company and he says the title defect is no big deal and can be cured easily. But, our attorney really scared my JV partner and told him he should cancel the deal. What should I do? Christina, Mt. Vernon, NY. A: Attorneys,unfortunately, are trained more to find problems than they are to find solutions and that’s what many of them do.  But, I think the bigger issue or concern should be that you and your JV partner are not […]

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Performance Property Real Estate Question

How The Iron Triangle Helps Investors With Contractors

Q: Gerald, I’ve been having trouble finding and keeping contractors to work on my property rehabs. I just want reliable, inexpensive contractors who do good quality work. What am I doing wrong?  Curtis, Union, N.J. A: That’s a good question, Curtis. All of us as investors are looking for contractors with those qualities. And let’s take a deeper dive on exactly what you’re looking at.  So, you’re looking for reliable contractors who are inexpensive and do top quality work.  I’d want that too, however, I’m not sure how realistic it is of an expectation consistently to have of a contractor. And the reason is pretty simple. Contractors are business people just like we are as investors. So, in the same […]

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Performance Property Real Estate Question

Do Rising Sea Levels Make Buying Coastal Property Too Dangerous?

Q: Gerald, We’ve been watching the devastating Hurricane Harvey aftermath.  Do rising sea levels make buying coastal property too dangerous? Ellen, Sea Girt, NJ. A: That’s a great question, Ellen. As economic losses in Texas and beyond continue to rise, some experts estimate that the losses may exceed $100 Billion dollars from this cataclysmic hurricane. You know, 100 years ago, most people preferred to live away from the water. In recent decades, as evidenced by property values, beach front property has become more desirable and more expensive. But, rising sea levels should change the way people think about waterfront property. At the end of the day, the desirability and the price of real estate boils down to supply and demand. […]

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Performance Property Real Estate Question

Resist Adult Onset Laziness

I often hear people say that they’re too old to do one thing or another. They’ll say, “When I was younger I’d do it, but I’m too old now.” I can’t help but speculate that many of these same folks at some point in the past used being too young as an excuse not to take some action. Now, being sick or being injured is a legitimate reason not to engage in certain activities. But, having been walking around on the planet a little longer than other people is NOT a legitimate reason.  Age is a relative measure and has little meaning in and of itself. It’s just a number. So, a 9-year old is old to a 5 year-old. […]

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Performance Property Real Estate Question

A Good Reason To Let A Tenant Break A Lease

Q: My cousin’s tenant wants to break his lease.  I know a lease is a binding contract, but are there any good reasons to let a tenant break a lease? Quincy, Chesterbrook, PA. A: That’s a great question, Quincy. And you’re right, a lease is a binding contract. But to be an effective landlord, you have to embrace the world as it comes at you and not get bogged down in the theoretical idealism of how things are “supposed to be.” So, I’m going to give you an example where it would make sense to let a tenant break their lease. Let’s say you have a tenant and the tenant lost their job – they can’t pay the rent. Let’s say […]

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Performance Property Real Estate Question

Bad Advice I Got From a Realtor

Q: My wife and I are buying our first home. Our realtor told us that since a home is your most important investment, we should stretch financially and buy as much hime as we can. What do you think? Jordan, Albany, NY A: Well Jordan, I unfortunately have heard that terrible financial advice from realtors before myself.  But, like a lot of quote, unquote “conventional wisdom,” it’s simply wrong.  Now, to play Devil’s Advocate, I suppose if you knew that you were going to make more money in the future it might make sense to pay a little bit more than you could afford to buy a home. But, how can you be sure that you’re going to make more money? And […]

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Performance Property Real Estate Question

Hidden Danger That Could Affect Your Mortgage Application

Q: Gerald, Since I’m planning to buy a home, I took your advice and got copies of my credit report from all three credit reporting agencies and went through them to look for mistakes that may hurt my mortgage application. Is there anything else that could affect my mortgage application? Glen, Bristol, PA. A: In addition to verifying the accuracy of what’s in your credit reports, you should also take a look at the CLUE report on the home that you want to by.  CLUE stands for Comprehensive Loss Underwriting Exchange and it’s a database that insurance companies use to evaluate risk and to decide premium rates.  And, if there’s a CLUE report on the home you want to buy, it […]

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Performance Property Real Estate Question

When Will The Next Real Estate Market Downturn Happen

Q: Gerald, house prices have been rising for a while now. When is the next real estate market downturn going to happen? Wendy, Great Neck, NY. A: Wendy, based on the historic 18 year real estate cycle, most local real estate markets in America are still in the expansion phase of the 4 phase cycle. We have to go beyond expansion to the hyper-supply phase before we would be faced with another recession. Based on the 18 year cycle, we’re about 7 years from another real estate market downturn. Bear in mind, that the 18 year real estate cycle is just a framework, what really matters is what actually happens in your local real estate market. Thanks for your question, […]

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Performance Property Real Estate Question

Don’t Be A Digital Crackhead

Let’s celebrate independence day this by disconnecting, for a moment, from the electronic gadgets and devices that consume so many of our lives. I know it’s hard.  Hard for me.  Hard for you.  Hard for everyone. It’s hard because clever designers and marketers deliberately built these devices to be irresistible. The truth is that multi-tasking is a myth.  You can do more than one thing at once, but you can’t really focus on more than one thing at a time. Also, time and energy spent with your gadgets saps strength, willpower and effort that can be channeled toward something more productive than liking a cat video on YouTube, for example.  Plus, it takes ramp up time to start a new […]

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Performance Property Real Estate Question

Can You Really Get A Mortgage For Zero Down Payment?

Q: Gerald, I want to buy a home and I don’t have much down payment money.  I heard that you can get a mortgage with zero down payment, is that true? Harry, Toms River, NJ A: Harry, the simple answer to your question is yes-in some cases you can get a mortgage with zero down payment. If you are a veteran, the VA has 100% loan programs and USDA offers zero down payment mortgages for eligible rural and suburban homebuyers in qualifying areas. But beyond 100% loans, there are several low down payment loan options. FHA offers 3.5% down payment loans. And FNMA and Freddie Mac have down payments as low as 3% and 5%. Seller financing is also another […]

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Performance Property Real Estate Question

What You Don’t Do Is As Important As What You Do

Decision fatigue represents the declining quality of decisions made by people after a long period of making decisions. Courtroom judges, for example have been shown to make poorer decisions later in the day versus early in the day. Albert Einstein and Steve Jobs notably reduced their clothing choices to just a few outfits in a deliberate attempt to limit the number of daily decisions they were forced to make. Everyday life is complicated enough–the key to productivity and sanity for that matter is simplification. There are only so many hours in a day and even the most active people don’t have a limitless store of energy. Consequently, it’s vital that you spend your most productive hours on your most important […]

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Performance Property Real Estate Question

How Many US Homes Are Still Underwater?

Q: Gerald, I keep hearing in the media that home prices are skyrocketing.  We bought our home at the height of the last market bubble in 2006 and I still don’t think we have any home equity.  How many US homes are still underwater? Monica, Las Vegas, NV A: Good question, Monica. As of the 1st quarter 2017, over 5 million U.S. properties, almost 10% percent of all properties, were considered seriously underwater. That number is down more than 15% from a year earlier but that’s still quite a bit of people who are underwater. Some areas, like the rust belt in the Midwest for example, tend to have a higher percentage of underwater properties than other areas of the […]

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Performance Property Real Estate Question

Foreclosure Trend Sweeping The Nation

Q: Gerald, we’re under contract to buy a short sale property.  How much time do we have to close before the bank forecloses on the property? Bonnie, Totowa, NJ A: Great question Bonnie, the simple answer to your question is that it depends on how far along in the foreclosure process the borrower who owns the property you are buying is.  In many places like North Jersey where you live, you can check the sheriff sale list online to see if there is a sheriff sale date scheduled—the foreclosure process is different in different states and areas but where you live, there normally has to be a sheriff sale scheduled before a property is actually foreclosed on.  If there is […]

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Performance Property Real Estate Question

You Get A Better Mortgage From Credit Union Or Bank

Q: Gerald, my wife and I are in the market for a home. Should we go to our credit union or a bank to get our loan? Kenny, Raleigh, NC. A: Credit unions are chartered to benefit their membership base so they’re more customer oriented than banks and they typically have lower mortgage interest rates than banks, but often take longer due to slower underwriting processes. Credit unions often keep their mortgages on their books whereas banks often sell off their mortgages—hence the better customer service at credit unions. You can normally get a mortgage loan faster at a regular bank than a credit union because banks are more likely to have automated underwriting processes and regular banks also tend […]

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Performance Property Real Estate Question

How To Get A Mortgage If You Have Student Loans

Q: Gerald, I want to buy a house but I have big student loans. Is there any hope for me? Dave, New Brunswick, NJ. A: Many homebuyers, especially first time home buyers are not comfortable taking on mortgage debt if they have student loans—for obvious reasons. Luckily for home shoppers with student loans, Fannie Mae recently announced changes to how student loan debt is treated that could make qualifying for a mortgage easier. Now, non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio when you try to qualify for a mortgage. For example, if a parent pays on their son or daughter’s student loan, it won’t be counted against the debt-to-income […]

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Performance Property Real Estate Question

How To Win At A Real Estate Auction

Q: Gerald. I went to the real estate auction for the first time—seeing all the confident investors bidding really intimidated me. Do you have any tips to getting a winning bid at a real estate auction? Karen, Hartford, Ct. A: Let’s start by defining what a win at a real estate auction is. For an investor trying to maximize returns, winning means buying property cheap enough to achieve their desired return. Winning doesn’t mean winning the auction bid—anyone can win an auction bid by paying too much—that’s a Pyrrhic victory. You win by buying at as low a price as you can. So, here is how you really win as an investor at a real estate auction—or at least how […]

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Performance Property Real Estate Question

Why Are Home Prices Rising So Fast In US Cities?

Q: Why are home prices rising so fast in US cities? Cheryl, Austin, Tx A: As more people prefer living in urban areas, builders are running out of lots to build on in places that people want to live. Also, zoning rules tend to permit high density construction in cities more so than in the suburbs and more rural areas. This pushes up the price of land in urban areas. With land more costly, developers try to compensate for higher land prices by building high-end more expensive condos and apartments that are more profitable which continues to feed the cycle.  At the end of the day, real estate pricing ultimately boils down to supply and demand. So, what’s the fix […]

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Performance Property Real Estate Question

What To Do If A Good Tenant Stops Paying?

Q: Gerald.  My tenant missed a rent payment–he’s a good tenant and he’s always paid on time.  He’s only 5 days late, but I’m worried. What should I do? Curt, Washington, DC A:Great question, Curt.  Should you give more slack to a good tenant?  Hell yeah, you should! Why? It’s not just for sentimental or to maintain good Karma reasons–although I have no problems with letting those things enter your mind. Remember my 1st real estate commandment: ”Real estate is more about people than it is about bricks & mortar.” (You can check out my other real estate commandments here: http://www.performanceproperty.com/about/) As CS Lewis said, “In our hearts we all know what’s right.” There’s nothing wrong with having empathy as a […]

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Performance Property Real Estate Question

What’s A Good Cap Rate for a Rental Property?

Q: Gerald, my wife and I are looking at rental properties to buy. What’s a good cap rate for a rental property? Doug, Little Falls, NJ A: Great question. Let’s start by defining what cap rate (capitalization rate) is. A capitalization rate is the percentage of return from an investment when you divide the Net Operating Income (NOI) by the price you are paying for the property. Cap rates do not consider the costs of financing into the investment equation and in my opinion cash-on-cash return is a more useful statistic for a real estate investor. But since some buyers use financing and some buyers pay cash, cap rates are used more often because it allows you to make an […]

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Performance Property Real Estate Question

How Long Does It Take To Evict A Tenant?

Q: Gerald, we just bought a rental property and I want to prepare myself for any eventuality. How long does it take to evict a tenant? Phil, Stamford, Ct. A: Landlord-tenant laws vary significantly from place to place, so the eviction process varies significantly from place to place as well.  Tenants generally are allowed more time if the eviction is without cause, as opposed to evictions with cause.   An example of an eviction without cause would be an eviction to allow a landlord to renovate a property.  An example of an eviction with cause  would be an eviction for non-payment of rent.   In some places, there are eviction moratoriums during certain times of the year like around Christmas.  Nobody, no […]

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Performance Property Real Estate Question

What Every Landlord Should Know About Mortgage Notes

Q: Gerald, I heard you say that your new real estate fund invests in real estate and mortgage notes. How can a landlord like me benefit from mortgage notes? Henry, Kalamazoo, MI. A: Landlords can use their rents as collateral in a collateral assignment, which allows them to securitize and borrow against their rents as a landlord. Gerald Lucas & mortgage note expert, Fuquan Bilal reveal what every landlord should know about mortgage notes in this installment of Ask Gerald A Real Estate Question.

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Performance Property Real Estate Question

What’s The Best Way to Finance a Rehab?

Q: Gerald, I found a good deal on a house that needs renovation.  What’s the best way to finance a rehab? Derrick, Sparta, NJ A: Derrick, when you raise or borrow money, particularly on a rehab, the devil is in the details, so the best financing route will often depend on the terms. Generally speaking, you can try to raise money by taking on debt or you can partner and give away equity to raise money for the rehab. The best way to finance the rehab will depend on your financing agreement or your partnership agreement and the specifics of your real estate deal, for example, the amount of time you expect will be required to renovate and sell the […]

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Performance Property Real Estate Question

Hidden Lease Liability Every Landlord Should Know

Q: Gerald, I just bought a rental property. Where can I get a good landlord-friendly lease? Monica, Oakland, CA. A: Finding the ideal rental property lease can be tough. There are many different types of rental leases that serve different purposes. Landlords generally want rental leases that protect their interests and leases are often written to favor one party or another, so landlords often look for landlord-friendly leases. However, in addition to protecting your interests as a landlord, it’s important to analyze your rental lease through the eyes of a judge, because if your lease isn’t deemed reasonable for both parties, then a judge is less likely to enforce the terms of your landlord-friendly lease. Also, landlord-tenant laws vary enormously […]

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Performance Property Real Estate Question

Tax Consequences of Gifting Property Before You Die

Q: Gerald, I want to leave our home to my kids, should I give it to them before or after I die? Dan, Peekskill, NY A: Dan, I’m sure you may have personal reasons for giving your home to your kids now as opposed to after you pass, so I’ll leave that up to you. If you expect to have a large estate when you die, gifting assets now and reducing the size of your estate may help you avoid estate tax. If you give your property to your kids now, their cost basis in your home will be the property value now. If you bequeath your property to your kids when you pass, their cost basis in the property will […]

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Performance Property Real Estate Question

Will Housing Market Crash In 2017?

Q: Gerald, I just read an article that said that 2017 could end up being the year of the great housing crash. What do you think? Andrew, Watertown, MA A: Andrew, real estate in general is an illiquid investment, which means that unlike in the stock market where a stock’s price could potentially drop to zero in one day, real estate prices really don’t move that fast. If we reached an inflection price and were headed toward a real estate market downturn and ultimately a housing crash, there would be indicators that we could see before that happened, like an increase in housing inventory for sale on the market. When houses sit on the market for a long time and […]

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Performance Property Real Estate Question

Risky But Powerful Tactic For Home Inspection Repair Requests

Q: I’m selling my property, the buyer just did an inspection and I got the inspection report with a ton of items they want me to repair. What should I do? Henry, San Diego, CA A: Real estate negotiations don’t necessarily end when you sign a purchase contract. Most real estate contracts contain an inspection clause that allows buyers the right to have the home they’re buying inspected for soundness. That way, if the inspection reveals a serious issue, you and the buyer can address it through renegotiations. After the inspections are complete, you have to decide if any problems found are worth renegotiating. Here’s the risk and opportunity to you as the seller: you are not obligated to address […]

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Performance Property Real Estate Question

How To Find Great Deals If Housing Inventory Is Low

Q: Gerald, lately I can’t find any property to buy, it seems like there’s nothing out there right now. What should I be doing to find good real estate deals? Carter, Passaic, NJ A: That’s a great question, Carter. It’s true that housing inventory is very low in many local real estate markets now for several reasons, not the least of which is because there are still many property owners who bought or refinanced at the height of the last real estate market bubble and therefore have little or no equity–these property owners are mostly sitting on the sidelines even if they want to sell because they’d have to reach into their pockets to pay off their underlying mortgage debt […]

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Performance Property Real Estate Question

4 Phases Of The Real Estate Cycle-Where Are We Now?

Q: Gerald, my best friend got burned when real estate prices fell 10 years ago and I’m worried. Where’s the market now and is there a threat of another bubble? Frank, Park City, UT A: Frank, every local real estate market is different so I’m always reluctant to over-generalize, however, things are different than they were 10 years ago. In the last real estate market downturn, there was a real estate bubble and a credit bubble that burst and caused financial havoc. I am going to share with you the four phases of the real estate cycle and where most real estate markets in the US are now. There are four phases to the real estate cycle: 1. Recovery, 2. […]

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Performance Property Real Estate Question

Will The Fed Raise Interest Rates?

Q: Gerald, I just got started investing in real estate. People say the Fed is going to raise interest rates. Is that going to happen and if it does should I be worried? Kendrick, Cuyahoga Falls, Ohio A: Hi Kendrick, I’m always reluctant to make predictions because unlike a lot of pundits you see on TV, I can’t predict the future however all signs point to another interest rate increase and Janet Yellen has intimated that a rate increase is likely to happen. The bigger and more important issue for you as a new investor is to understand where you have the most leverage and to then focus on those areas. Interest rates are one of 7 things you cannot […]

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Performance Property Real Estate Question

How To Sell Real Estate Tax Free

Q: Gerald, my cousin is selling a property he’s owned for a while that’s gone up in value, but he’s worried about paying taxes on the gain. Is there any way to avoid paying big taxes on the profit? Ted, Bozeman, MT A: That’s a great question, Ted.  There are two IRS codes that may allow your cousin to exclude or defer taxes on the gain from selling his property.  IRS code 121 allows you to exclude up to $250,000 as an individual ($500,000 if you file taxes jointly) of the gain from the sale of property that’s been used as a primary residence for at least two of the last five years before the sale.  IRS code 1031 allows […]

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Performance Property Real Estate Question

How The Endowment Effect Hurts Homeowners Trying To Sell

Q: Gerald, we’ve been trying to sell our home for over a year. Our agent has been telling us to lower our price, but the market here is really hot and I don’t want to give it away. Our house is nicer than the other houses in our neighborhood, our backyard is bigger, our basement is finished and we have a beautiful custom deck. What is our real estate agent doing wrong? Kendrick, Upper Marlboro, MD A: I’m not sure whether your Realtor is any good or not, but the bigger issue is that even in a hot real estate market, buyers are always going to look for the best value they can find. I’m sure you are understandably proud […]

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Performance Property Real Estate Question

How Mortgage Rate Hikes REALLY Affect You Financially

Q: Gerald, my mortgage broker is telling me that mortgage rates are going to go up and that I should buy a home now before they do. Even if rates go up a little, won’t they still be historically low? Should I buy now? Carrie, Boulder, CO A: Great question, Carrie. The simple answer to your 1st question is yes, even if mortgage rates go up a little they’ll still be historically low, however that doesn’t necessarily mean that you should buy now. You’ve got to look at your personal goals and financial situation to make an intelligent decision on whether to buy a home, but let’s look at how mortgage rate movements will affect your financial ability to buy. […]

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Performance Property Real Estate Question

Renovations You Should Do Before Selling A Home

Q: Gerald, we are about to sell our home.   We’ve lived here for many years and there are some things that need fixing.  Which renovations should we do before we sell our home? Emily, Portland, Oregon A: Hi Emily, that’s a great question and it’s one that I get asked all the time.  The best approach is probably not what you expect.  Most of us want to get the highest price we can for our property when we sell so we often assume that it’s in our best interest to do repairs and renovations before we sell.  Although it may seem counterintuitive, in most cases it’s not in our best financial interest to do renovations right before we sell because […]

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Performance Property Real Estate Question

How Refinancing Can Hurt You Financially

Q: Gerald, I heard interest rates are probably going to go up.  Before they do, I’m thinking we should refinance again.  Mortgage rates are lower now than they were when we last refinanced.  Do you think we should refinance again now? Doug, Hempstead, NY A: Hi Doug.  First of all, let’s define what “refinancing” really means.  Refinancing a mortgage is not free, it’s a service that lenders charge you money for.  When you refinance a mortgage, normally you are paying a lender a fee or a set of fees to lend you money against equity you have in your property. There’s a difference between spending and saving.  Saving is the opposite of spending.  If you go shopping and buy stuff […]

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Performance Property Real Estate Question

Is Senior Citizen Housing A Good Real Estate Investment?

Q: Is Senior Citizen Housing A Good Real Estate Investment? Ernie, Pittsburgh, PA A: Good question, Ernie, but I would caution you not to generalize about broad real estate market niches.  I understand that many investors, institutional and private investors have become interested in senior housing because of the powerful lure of an aging baby boomer population.  I know some investors who have both made and lost money building and investing in over 55 communities. There are many factors that make a real estate investment sound and demographic trends are certainly one of them, but but you have to look further.  You have to look at supply, demand, building and labor costs if you are building as well as cost […]

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Performance Property Real Estate Question

Do Students Make Good Tenants?

Q: Gerald, I’m about to buy a rental property and I was wondering if students make good tenants? Julian, King Of Prussia, PA A: Great question, Julian.  First and foremost, you should always screen potential tenants regardless of what your general strategy is as a landlord.  Your strategy as a landlord should be guided by the specifics in your local real estate market where your rental property is.  If your rental property is in a college town, students may be the ideal tenants, however, since students tend to be more transitory, you’ll need to budget for higher turnover costs (painting, carpeting, wear and tear) and since younger students often don’t have credit history, you should consider requiring co-signers with established […]

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Performance Property Real Estate Question

Biggest Real Estate Opportunity Of 2017

Q: Gerald, what real estate opportunities should I be looking out for this year.  Caleb, Scotch Plains, NJ A: Great question, Caleb.  Let’s take a quick look at some demographic trends.  Millennials (generally considered to be people ages 18-35) have recently overtaken Baby Boomers (people of ages 51-69) in sheer numbers.  America’s population of people aged 90-and-older has almost tripled since 1980.  One new trend is that older households and younger households are competing for housing in many of the same real estate markets.  Many millennials still do not have sufficient income and established credit to buy real estate which is why multi-family housing is still a very strong real estate opportunity in 2017. Multi-family housing can satisfy both Millennials […]

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Performance Property Real Estate Question

Biggest Threat To Real Estate In 2017

Q: Gerald, I keep hearing that we may be in another real estate bubble and everyone’s talking about interest rates going up, what should I be looking out for in 2017? Jasmyn, Bowie, MD A: Hi Jasmyn, thanks for your question and happy new year.  There are plenty of real estate trends on the horizon to keep an eye on but one of the biggest challenges to real estate in 2017 is housing affordability.  Home prices on average nationally are rising at 5 percent annually, which is double the rise in income–as I’ve said before, when home price increases outpace personal incomes, there’s only a matter of time before home prices fall because people’s incomes simply can’t support those inflated […]

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Performance Property Real Estate Question

End Of Year Real Estate Tips Part 2

Q: Gerald, I’m a real estate professional.  Do you have any year end real estate tips for me? Lance, New Bedford, MA A: Hi Lance, last week I mentioned that you can reduce your tax burden as a real estate professional for this current tax year by paying more of your business-related expenses before the end of this year and by deferring some of your income til next year.  Here are 3 more year-end real estate tips that’ll get through the winter: 1) Flush your water heaters. This is a cheap and easy procedure that only costs about $30. Flushing water heaters helps to control the buildup of mineral deposits, resulting in a more efficient heater. 2) Service oil or […]

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End Of Year Real Estate Tips Part 1

Q: Gerald, I’m a real estate professional.  Do you have any year end real estate tips for me? Lance, New Bedford, MA A: Hi Lance.  Two ways to reduce your tax burden as a real estate professional for this current tax year is to pay more of your business-related expenses before the end of this year and defer income til January of next year.  For example, you can send invoices late in December so collections won’t occur til January of next year–doing this will reduce your tax burden by reducing your taxable income. Thanks for your question, Lance-stay tuned for next week when I’ll reveal another end of year real estate tip. For more real estate tips and information visit […]

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Performance Property Real Estate Question

Tax Consequences Of Selling Property In December vs. January

Q: My buyer had some complications with his mortgage so it has taken longer than expected to close on a property I’m selling.  Should I just wait until January to close for tax reasons? Nicole, Bridgeport, Ct. A: Hi Nicole, that’s a good question.  I don’t know whether you are selling your personal residence or another property that you own–if you’re selling your personal residence, you’re eligible for a $250,000 exclusion on the gain when you sell as an individual or a $500,000 exclusion on the gain when you sell if you’re married and file your taxes jointly with your spouse. In answering your question, I’ll assume you are selling an investment property not your personal residence.  If you close […]

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Performance Property Real Estate Question

How To Get The Highest Price When You Sell A Home

Q: Gerald, I’ve been arguing with my business partner about what sales price to start with on a house we just rehabbed.  We want to get the highest price we can, any suggestions? Reggie, South Orange, NJ A: Reggie, great question.  Like you and your business partner, everyone wants to get the highest price they can when they sell a  home.  The a mistake that a lot of people make when they sell a home is overpricing their property.  I understand the mistaken logic that many people use when they make this critical error–they figure, if their property is worth say $250,000, maybe I should put the property on the market at $300,000 and see if I get any takers?  […]

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Performance Property Real Estate Question

Killer Holiday Season Real Estate Opportunity

Q: Gerald, you’ve said that real estate tends to slow down during the holidays, should I take my foot off the gas in my real estate business between Thanksgiving and New Years? Anderson, Pearl River, NY A: I’m glad you asked that question, Anderson. The simple answer is no, you shouldn’t slow down your real estate business during the holidays unless you have some non-business related reason to do so. Think about it, lower market activity means less competition for the motivated real estate investor. I am a contrarian by nature anyway–as I’ve said before, if you follow the herd, you’ll end up scraping shit off the bottom of your shoes, so if everyone else is slowing down, I suggest […]

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Performance Property Real Estate Question

3 Property Trends To Be Thankful For

Q: Gerald, I’m having a hard time finding good real estate deals, is now a bad time to invest?  Karly, Cliffside Park, NJ A: Hi Karly, great question.  It’s always a good time to invest in real estate, you just have to change your tactics and strategies depending on what’s going on in your local real estate market.  I saved this question specifically for Thanksgiving week, because although housing inventory levels are low, which I’m sure is responsible for some of your frustration, there are some really good real estate trends to be thankful for–here are 3: 1) While the real estate investing buy-side is more challenging, the sell-side of the business because of low inventory and high demand is […]

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Performance Property Real Estate Question

Refinance Your Mortgage Even With No Equity

Q: Gerald, interest rates are still very low, but I bought my home 10 years ago at the height of the real estate market bubble and I still don’t have any equity.  Is there a way for me to refinance and take advantage of these low rates?  Aaron, Worcester, MA A: Good question, Aaron.  If your mortgage loan is owned by Fannie Mae or Freddie Mac, you may qualify for HARP refinancing with the Home Affordable Refinance Plan (HARP).  The Home Affordable Refinance Program (HARP) was created to help homeowners who are current on their mortgage payments, but have little to no equity in their homes, refinance their mortgage.   So, if you owe as much or more than your home […]

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Voting Is The Beating Heart Of Democracy

Tuesday November 8th 2016 is election day–not a day too soon for many of you! It’s easy to get jaded and pessimistic about our elections. I often hear people of all political stripes gripe about how corrupt politicians are, how bad their choices are and how their vote doesn’t matter. There is some truth to those criticisms. Although circumstances could always be better, remember that they also have the potential to be a whole lot worse. Democracy can be frustrating but the alternative to democracy is normally worse. It is ok to complain though–you can voice your complaint in the voting booth. Politics is much simpler than many people think—-convince enough other people of the merits of your position and […]

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Performance Property Real Estate Question

Tell-Tale Sign Of A Real Estate Market Bubble

Q: Gerald, it seems like real estate prices have been going up quite a bit lately.  Is this another bubble?  How can we tell? Jennifer, Islip, NY A: That’s a great question, Jennifer.  Home prices in many places have been rising recently due in large measure to the fact that there is so little housing inventory available for sale because so many people bought at the height of the last market bubble and have little or no equity.  To your question, what I’m going to do is give you a tell-tale sign of another real estate market bubble.  Because household income is the biggest economic driver of residential real estate markets, a tell-tale sign of a real estate bubble occurs […]

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Performance Property Real Estate Question

Best Way To Get Rid Of A Bad Tenant

Q: Gerald, I have a tenant that’s been a nightmare ever since she moved in–she’s always late on rent, only pays after I threaten to take her to court and she bothers and harasses the other tenants in the building.  What should I do?  Mattie, King Of Prussia, Pennsylvania. A: A healthy landlord-tenant relationship must be a symbiotic one.  If you want good tenants, you have to be  good landlord and it’s important as a landlord that you set and manage expectations from the beginning.  That said, if you have a problem tenant, it’s normally in your best interest if you can to work out an agreement with the tenant to leave and avoid having to go to court where […]

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Performance Property Real Estate Question

3 Extra Rental Property Income Streams For Landlords

Q: Gerald, my insurance and property taxes on my rental property went up this year and I’m barely breaking even every month.  How can I make more money to offset these expense increases? Jason, Ridgewood, NJ A: Great question, Jason. The first thing you should look at is potentially increasing rents at your property, but you have to be careful because your ability to do that will really depend on your local rental market demand because as I’ve said many times before, the person with the money decides the price. In this case, potential tenants have the money and ultimately decide rental prices. So, if you raise rents way above what similar properties in your area are going for, your […]

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Performance Property Real Estate Question

Number One Skill New Real Estate Investors Overlook

Q: Gerald, I’m a new investor having trouble getting started and finding good real estate deals.  What should I be focusing on? Caleb, Babylon, NY A: That’s a great question, Caleb.  Real estate investors have to do lots of different things to be successful–we buy, sell, negotiate and manage property just to name a few things, but we can’t do any of those things until we locate actual real estate deals, which is why one of the most important and most overlooked role we play as real estate investors is the role of marketer to find real estate deals in the first place. All the other roles as buyer, seller, negotiator and property manager are obviously essential but until you […]

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Performance Property Real Estate Question

Why Are So Few Houses For Sale Now?

Q: Why Are So Few Houses For Sale Now? Stacy, Orange, NJ A: That’s a great question, Stacy.  The very low housing inventory levels we’re seeing now are due primarily to the fact that despite the fact that housing prices have steadily increased in recent years, there are still quite a few homeowners who purchased  or refinanced property at the height of the last real estate market bubble and as a result have very little or no home equity–what this in turn means is that for these homeowners to be able to sell their property, they would have to reach into their pockets to pay off their mortgage debt which effectively traps them and prevents them from being able to […]

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Performance Property Real Estate Question

What The Hell Is A Zombie Foreclosure?!

Q: Gerald, I heard an economist recently say that the number of zombie foreclosures were going down. What The Hell Is A Zombie Foreclosure?! Jamie, Bayonne, NJ A: A zombie title is a real estate title that has stayed with the owner of a residential property after the mortgage lender has begun a foreclosure process (making the owner believe in some cases that they no longer own the property).  If the lender does not finish the foreclosure process, the title to the property remains in zombie status, which means it remains in limbo, hence the phrase, zombie foreclosure. Some homeowners pack up and move when they receive a foreclosure notice because they assume the lender will take the property from […]

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Performance Property Real Estate Question

3 Signs Real Estate Prices Will Change

Q: Gerald, I’m trying to stay on top of the real estate market, how do I know when prices will start moving in the other direction? Stan, Utica, NY A: Good question, Stan.  You are correct to monitor your local real estate market so you can stay ahead of the game and ahead of your competition.  I’m going to give you 3 indicators that telegraph a possible inflection point resulting in real estate price changes: 1) Housing Inventory Levels: Home sale activity is the best leading indicator of real estate price trends–this is because buyers create the demand for housing that is directly linked with price movement.  Housing inventory levels (# months required to sell the homes for sale in […]

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Performance Property Real Estate Question

What Does Landlord Liability Insurance Cover?

Q: I own rental property and my insurance broker recommended I look into landlord liability insurance?  What does landlord liability insurance cover? Cliff, Wayne, PA   A: Good question, Cliff.  Landlords can be hit with legal claims that can result from various causes (for example if someone slips, falls and gets hurts on your property).  Not to be confused with homeowner’s or property owner’s insurance, landlord liability insurance covers the cost associated with your legal defense as a landlord. Landlord liability insurance helps you to protect your rental property investment in the event of a liability claim filed by a tenant or a visitor to your rental property. Thanks for your question, Cliff!  For more real estate tips and information […]

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Performance Property Real Estate Question

How Much Time Should I Give A Buyer To Get A Mortgage?

Q: Gerald, I’m under contract to sell my home and it seems like I’ve been waiting forever for the buyer to finalize his mortgage. How much time should I give a buyer to get a mortgage? Claudio, Chicago, IL. A: That’s a great question, Claudio.  As the saying goes, time is money–the longer you have to wait for your buyer, the more mortgage interest you have to pay on your own mortgage and the more you’ll be forced to pay in property taxes and other expenses associated with the property you are selling.  For starters, you should vet any buyer you choose to sell to by making sure they provide a written mortgage pre-approval before you sign a contract. The […]

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IRS Cuts Taxes For Unmarried Homeowners

Q: Gerald, I own several properties jointly with my boyfriend.  How much mortgage interest can we each write off on our taxes? Karen, San Bernardino, CA. A: Karen, unmarried couples can now deduct effectively twice as much of their mortgage and home interest on their tax returns, thanks to a recent change by the Internal Revenue Service.  The law says taxpayers can deduct up to $1 million in mortgage debt and $100,000 in home equity financing, but the new IRS position on the mortgage deduction based on a ruling from a lawsuit brought by an unmarried California couple that co-own property, allows them now to deduct up to $2.2 million.  This new IRS position presents a strange situation–get married and […]

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How Smart Investors Take Advantage of Low Interest Rates

Q: Gerald, how can I make the most of today’s low interest rates?  Nirav, Somerville, MA A: That’s a great question, Nirav.  One obvious way to take advantage of historically low rates is by purchasing real estate with a fixed rate mortgage.  Nobody knows how interest rates will change in the future, but locking in a long-term mortgage at a low fixed rate is normally a smart move if you can afford the payments particularly if mortgage rates go up in the future. A less obvious effect of a low interest rate environment that truly savvy real estate investors recognize is that low interest rates often result in there being a lot of unemployed capital sitting on the sidelines looking […]

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What Happens if a Divorcee Gets the House & Stops Paying the Mortgage?

Q: Gerald, I have a client who’s worried about his credit, because his ex-wife who got the house after their divorce stopped paying the mortgage. Jenny, North Bergen, NJ A: Jenny, as part of a divorce settlement, one spouse often gets the marital residence.  In many cases, both spouses signed the original mortgage note (check with your client to see if this occurred in his situation).  Many people don’t realize that transferring title does not remove an ex spouse’s obligation on the note.  Furthermore, if the spouse who got the house stops making mortgage payments, there’s no way for the other spouse to get the property back. One way for a spouse to protect themselves from this calamity is to […]

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Get Unstuck Using The Corridor Principle

Q: Gerald, I’ve been trying and trying to get my real estate business going for a while, but things never seem to line up the way I need them to. What am I doing wrong? Scott, Poughkeepsie, NY A: That is a great question, Scott and it’s one that I get asked all the time from people like you who are frustrated trying to get started investing in real estate.   The first thing you always want to avoid when you’re trying to accomplish anything is self-sabotage, because you can be your own worst enemy.  To help you, let’s talk about the corridor principle and how it’s key to you finding opportunities and conquering your fears. In the 1980s, Robert Ronstadt […]

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How Will This Year’s Election Affect The Real Estate Market?

Q: How will this year’s election affect the real estate market? Deanna, Philadelphia, PA A: Hi Deanna, that’s a question I’ve been asked a lot this year.  First, I want to point out that there really is no such thing as “the real estate market” because every local real estate market is different and it’s a mistake to generalize across different real estate markets. Local real estate market prices are driven by many factors, but the biggest factor is supply and demand.  The one factor we can look at that does affect people across local real estate markets is mortgage rates. How will the election affect mortgage rates?  I unfortunately am not able to predict the future, so I don’t […]

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How To Delay A NJ Foreclosure Sale EVERY Time

Q: Gerald, I’m in the process of buying a short sale in Jersey but there’s a foreclosure sheriff sale coming up this month and the bank claims there isn’t enough time to process the paperwork. What can I do? Marjorie, Kenilworth, NJ A: Great question, Marjorie.  I’ve successfully negotiated hundreds of real estate short sales in my investing career and what a lot of people don’t know is that under New Jersey Statute, a Sheriff’s sale of a foreclosure property can be adjourned (which means postponed) twice by the Sheriff at the request of the homeowner for any reason. Once the two “free” adjournments have been exhausted, the homeowner may apply to the Court by Motion for further adjournments but […]

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Dumbest Thing An Investor Can Say To A Home Seller

Q: Gerald, I’m trying to buy a junker property to rehab. The owner keeps telling me about how much the properties in the neighborhood are selling for and when I pointed out how bad her property looks she got really pissed off and won’t return my phone calls. SOS, need some help. Cory, Edison, NJ A: Cory, one fundamental rule that you must understand if you want to be successful as a real estate investor is that real estate is a lot more about people than it is about bricks and mortar.  You may be absolutely right about the condition of this woman’s home, but it’s vital that you show respect and concern for her, particularly if this is the home […]

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3 Ways To Beat Rising Rehab Costs

Q: Hi Gerald, My rehab costs have really been going up lately. It’s affecting my ability to do profitable rehab flips. What can I do? Lance, Fort Lee, NJ A: I hear you loud and clear, Lance.   A useful way to analyze rehab costs is to separate the cost of renovation into its parts, which are labor costs and materials costs.  The cost of both labor and materials varies from place to place, but I can certainly attest to higher labor costs lately in my market. Here are 3 ways to beat rising rehab costs: 1) buy building materials in bulk–you’ll save money, it may even make sense to team up with other rehabbers you know out there who are […]

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What Julius Caesar Can Teach Us About Our Real Estate Business and Life

The month of July was named in honor of the Roman general, Julius Caesar. As real estate investors, here are some insights we can derive from the famous military leader’s life. Be Bold, Take Chances While sailing to Greece, Julius Caesar was kidnapped by pirates and held for ransom. When informed that the pirates intended to ask for 20 talents as ransom, Caesar insisted that he was worth at least 50. He maintained a friendly, joking relationship with the pirates while the money was being raised but warned them that he would track them down and have them crucified after he was released. After the ransom was paid, Caesar raised a fleet, pursued and captured the pirates, and had them crucified (as a sign of leniency, he first had their […]

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How To Beat The Rising Home Price Trap

Q: Hi Gerald, I’m a rehabber negotiating a purchase of a bank-owned property.  The listing broker keeps telling me I have to raise my purchase offer price because the market is hot.  I want to build a good relationship with him, should I offer more? Eddie, Florham Park, NJ A: Great question, Eddie.  I understand the pressure you’re under today with rising home prices and low housing inventory.   The listing agent’s goal is to get the house sold, so it makes sense that he wants you to make a higher offer. That makes his job easier with the bank.  But in order to be successful as an investor, you have to think independently and you can’t afford to let other […]

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The Untold Truth About Fractured Condo Deals

Q: Gerald, my broker just gave me a tip on a fractured condo deal in Florida.  Do you think these are safe real estate investments? Jack, Ashville, NC A: Interesting question, Jack.  Let’s first define what we’re talking about for everyone out there.  A fractured condo project is one in which only some of the individual condo units were sold by the initial real estate developer.  The unsold units present both potential investment opportunity as well as potential risks.   These fractured condo deals are appealing because an investor may be able buy them at a big discount from the price the developer initially sold the early units for.  However, even if that’s the case, it doesn’t necessarily make it a […]

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How An Insurance Company Can Screw You Even If You’ve Paid

Q: Gerald, my friend had a fire in their rehab property and the insurance company is refusing to pay the claim, should he sue? Ebony, Maplewood, NJ A: Hi Ebony, great question.  The key here is the insurance policy that your friend had.  An insurance policy is a contract with specific clauses.  If he lived up to his end of the bargain, then the insurance company should pay and if they don’t he should go after them. However, if one of the insurance policy clauses was violated (i.e. if the property was supposed to be occupied and was actually vacant for example) the bank may not be obligated to pay the claim.  Insurance is a good business for insurers because […]

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Finally Get Stuff Done!

Over the years, I’ve come to realize that we do ourselves a disservice when we take on new projects before we finish important projects we’ve already begun. Over time, we end up with half-finished messes instead of certified accomplishments. This is why it’s best to complete any task worth doing as soon as humanly possible, even if it means taking on fewer projects. As the explorer Alex Mackenzie once said, “The key to successful time management is doing the most important task first and giving it your full concentration, to the exclusion of everything else.” Although it does require some discipline to avoid distractions, it’s well-worth the effort. As the Dalai Lama put it, “Desire without self- discipline leads to self-destruction.” The […]

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The Pitfalls Of Trying To Pay Off Your Mortgage Early

Q: Gerald, everyone always says that you should pay off your mortgage early. I remember you saying there was a danger in doing so….why? Esther, Grand Rapids, MI A: That’s a great question, Esther and yes, the conventional wisdom from many people like Suze Orman for example is that you should try to pay your mortgage off early by making extra principal payments regularly.  Before I present the danger of trying to pay off your mortgage early, I will acknowledge the benefit of lower monthly fixed costs when your mortgage is paid off. The danger lies in getting stuck or hitting a bump in the road financially before the mortgage is fully paid off.  It’s like trying to swim across […]

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Commercial Property Danger Investors Should Avoid

Q: Gerald, my business partner and I are looking at a commercial property we want to buy.  The cap rate for similar properties in this area is about 4% and this property yields almost 6% so we’re going to jump on it.  Any last minute tips you can offer me? Robert, Short Hills, NJ A: Robert, first kudos to you for spending the time and effort to do your due diligence, because the numbers are critical for an investment property. The one concern I have regarding your potential investment is your debt service–in other words, how you are planning to finance the purchase.  If you’re paying cash, I’m not as concerned, but if you are borrowing money to purchase this […]

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The Toughest Homes To Buy In Today’s Real Estate Market

Q: Gerald, My husband and I just got out of graduate school and are trying to buy our first home.  There weren’t many homes available in our price range.  We  found a home we liked and were pre-approved for a mortgage but our loan was denied.  Is it supposed to be this hard? Mary, Dallas, Tx A: Mary, I understand your frustration.  Lower priced starter homes ideal for 1st time homeowners are hard to come by right now–starter homes as a percentage of all homes available in many real estate markets are at all-time lows. There are many factors that are contributing to this dynamic: Firstly, the cost of land has gone up in many real estate markets so builders often […]

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Foreclosure Auction Sale Secret Many People Don’t Know

Q: Gerald.  If I buy a property at the sheriff sale and there are people living in the property, is the bank responsible for removing the residents? Dawn, Boston, MA A: Dawn, if a bidder purchases a home at a sheriff sale auction, he is responsible for evicting residents, not the lender because the lender never became the owner of the home. The new owner must go to court and use formal eviction proceedings to remove occupants of the foreclosed home. The lender is also not responsible for any damages the occupants inflict to the home while the new owner is trying to evict.  There are many risks involved in buying foreclosed property at a sheriff sale that you should […]

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What Warren Buffett Just Told Me About Real Estate Prices

Q: Gerald, I know you go to the Berkshire Hathaway Shareholder Meeting every year. What insights did you get from Warren Buffett about the real estate market? Elvin, Teaneck, NJ A: Yes, Elvin, I do go to the Berkshire Hathaway Annual Shareholder Meeting every year, often called The Woodstock Of Capitalism to hear Warren Buffett & Charlie  Munger, the 2 smartest business minds on Planet Earth speak extemporaneously for 5 hours.  In fact I just returned from the 2016 Berkshire Shareholder Meeting and as usual, Warren & Charlie did not disappoint this year-their wit and insight were well worth the trip. To answer your question, Warren Buffett was asked about a comment he made back at the 2012 shareholder meeting […]

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Sneaky Tip To Uncover A Property’s Secrets Before You Buy

Q: I’m about to go into contract to buy an investment property.  The last rental property I bought turned out to be a disaster.  I want things to work out better this time, do you have any advice for me?  Carlos, Woodbridge, NJ A: Good question, Carlos.  What you don’t know about a property or any asset that you buy can hurt you, so you definitely should always do all your homework BEFORE you buy. Most investors, when researching an investment property before they buy focus their attention solely on financial information (i.e. rental income and expenses)–obviously finances are critically important but are only part of the overall picture of a rental property.  At the end of the day, to […]

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Trick Banks Use to Make You Overpay for Property

Q: I’m going to the sheriff sale auction to see if I can buy an investment property on the cheap.  Any tips you can give me?  Calvin, Montclair, NJ A: Good question, Calvin.  You have to be very careful at auctions because there’s usually at least one person at an auction dumb enough to pay too much—you never want to compete with idiots–better to let them win. Auctions use the law of supply and demand to work in the bank’s favor at the sheriff sale.  Their objective is to create an auction effect. An auction effect occurs when buyers get into a “gotta have it” mindset that can pressure them into paying more than they should. People at the auction […]

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Hidden Danger of Condos

Q: My wife and I found a really good deal on a condo 25% cheaper than what the last buyer paid for it.  What do you think?  Kenny, West Orange, NJ A:  Well on the surface, a 25% discount definitely looks like a bargain, however, the market value of the condo may have been very different when the last buyer purchased it and residential property values are typically only valid for about 6 months. Another thing to consider is that there are hidden dangers in condominiums that you should be aware of–as a former condominium developer myself, I know this from experience.  One big danger with condominiums that many people aren’t aware of is an underfunded association.  Condominiums are normally […]

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Are Private Lender Lists A Scam?

Q: Have you heard of or used a website that offers a list of private money lenders?  Is this a scam?  Louis, Mendham, NJ A: Louis, I’m not sure what particular website you’re referring to but generally speaking, you should always be skeptical of anything you see advertised on the Web particularly if you don’t have any way to verify the company or individual behind it. Here are 3 indicators that an online service may be fraudulent: 1) They have no physical address 2) They charge upfront advance fees 3) They exert pressure to act immediately–advance fee loan scammers, for example, will try to get you to send money or give out personal information (credit card number, bank account information […]

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Can I Borrow My Loan Down Payment to Buy Property?

Q: I am looking into buying a duplex. I would be getting a loan but I would still like to put a downpayment of 10%-20% which I would like to find a private lender to pay for.  Vicente, Pomona, California A: Vicente, traditional lenders often require borrowers to ‘source’ the money they contribute to the purchase of property and a lender may refuse to approve a loan where the entire down payment comes from even a gift or if the gift is not from a close family member. Generally, lenders want to know who else their borrowers are borrowing from and ultimately, your ability to borrow a down payment depends on the requirements of the primary lender you’re borrowing from.  […]

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Hard Money Or Private Lender: Which Is Better?

Q: I have a property that I am interested in purchasing with a partner. Would I be able to get a hard money loan or would I be better off with a private lender? Jack, Morristown, NJ A: Good question, Jack. In general, hard money lenders are in the business of lending out money short term for profit–they often borrow and pay interest on the money that they lend too so they are incentivized to charge higher interest rates. Private lenders are typically individuals seeking additional income by passively investing in real estate. Ultimately, access to capital is more important than the amount you pay for it, so if you need money to fund a deal, anything is better than […]

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Who REALLY Has The Power In Any Real Estate Deal?

Q: I’ve been negotiating the price on a house with a seller that wants a lot more money than the home is worth.  What can I do to convince them their asking price is too high?  Jody, Hillsborough, NJ A: That’s a great question, Jody–it’s one I often get asked from frustrated real estate investors who come to me for help.  The truth is that you may not be able to convince the inflexible seller you’re negotiating with that their asking price is too high, but I want to bring up a bigger and more important point for you to consider….and that is who REALLY has the power in almost any real estate deal.  In most situations, the person with […]

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What Percentage Will Banks Discount Foreclosed Homes?

Q: What Percentage Will Banks Discount Foreclosed Homes? Jim, Alpharetta, Georgia A: When banks sell foreclosed homes, they are normally trying to minimize their losses by trying to get the highest price they can.  Overtime, however, banks have no choice but to reduce the price of foreclosed property that has not yet sold, so the most patient real estate investors will earn the steepest discounts. In general, it’s wrong to think of target pricing for foreclosed property in terms of a % discount for several reasons including the fact that the bank’s estimated property value of a foreclosed property may be inaccurate.  Banks have lots of foreclosed property that they have to dispose of, and banks are typically playing with […]

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#1 Trick Bad Tenants Use To Get A Landlord To Rent To Them

Q: Gerald, I remember you mentioning the #1 trick bad tenants use to trick landlords into renting to them but I forgot what it was.  What was it? Chelsea, Sea Bright, NJ A: Great question, Chelsea.  The #1 trick bad tenants use to trick a landlord to rent to them is….showing up with a big wad of cash and asking to move in right away.  Now the reason, this is the #1 trick that bad tenants use is because a landlord’s main goal is to collect rental income and it’s very tempting to take money when someone is waving it in your face.  The potential problem for landlords is that when someone shows up suddenly with a bunch of money […]

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Top 3 Qualities You Should Look For in a Real Estate Partner

Q: I want to partner with other people on real estate deals that I find. What should I be looking for in a real estate partner? Brian, Westerville, Ohio A:  A healthy partnership can benefit you as a real estate investor.  Partnerships provide moral support and encourage creative brainstorming.  It’s useful to get a second opinion on decisions you make in your real estate business, particularly when you start out.  I’ve been involved in many partnerships over my real estate investing career.  Here are the top 3 qualities you should look for in a real estate partner: Complementary skills: partnerships are most effective when each partner specializes in certain aspects of the business–this specialization is easier when partners bring different […]

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Trulia or Zillow? Which is Better at Estimating Property Values?

Q: Trulia or Zillo? Which is better at estimating property values? Rich, Lakewood, NJ A: The amount of information, resources and tools available on Trulia and Zillow is enormous. Regrettably, the accuracy of the information on Zillow & Trulia often leaves much to be desired.  Trulia & Zillow use algorithms, to approximate property values.  Algorithms are mathematical formulas used for solving problems.  Unfortunately, the property values that these algorithms produce are not consistently accurate. Here are three major difficulties with Trulia, Zillow and other public property search portals: 1. Their information Is Inconsistent Trulia and Zillow, by their own admission acknowledge that their estimates are wrong a large percentage of the time.  So the risk is that a home buyer […]

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How Attorneys Steal From People in Foreclosure

I have seen many unfortunate homeowners who are behind on their mortgage payments lose thousands of dollars, in some cases tens of thousands of dollars to unscrupulous attorneys.  The main way attorneys steal from people in foreclosure is by charging exorbitant upfront fees and then stringing them along charging more and more fees as time goes on.  The attorneys then don’t deliver on promises that they made to homeowners.  Often, people who find themselves in foreclosure are understandably afraid and sometimes desperate and are looking for honest help–many unethical attorneys exploit homeowners in this situation for their own financial gain. The best way for homeowners in foreclosure to avoid losing money to swindler attorneys is to never agree to pay […]

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Rock Salt Or Calcium Chloride: Which Is the Best Snow/Ice Remover?

Q: Rock Salt Or Calcium Chloride: Which Is the Best snow/ice remover? Candy, Arlington, MA A:  The 2 main snow and ice removal agents people use are rock salt (aka sodium chloride) and calcium chloride.  The only real advantage of using rock salt over calcium chloride to remove snow and ice is that rock salt is a little cheaper.  However, calcium chloride offers several advantages over rock salt: One of the most obvious advantages is that calcium can be effective at much colder temperatures than sodium chloride/rock salt.  In fact, calcium chloride can be effective at temperatures as low as -25 degrees Fahrenheit, while rock salt loses its effectiveness at temperatures below 15 degrees Fahrenheit. Also, rock salt poisons soil, damages […]

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How Much Earnest Money Do I Need to Pay to Buy a Bank Property?

Q: Gerald, I saw a bank-owned property that I want to try to buy. How much earnest money do I need to pay to buy a bank property? Rich, Hazlet, NJ A: That’s a great question, Rich.  Bank-owned property transactions also known as REOs (which stands for real estate owned) are often more intimidating for the uninitiated than typical real estate purchases.  There is no all-encompassing rule etched in stone when it comes to earnest money on REOs or any real estate transaction for that matter. Let’s first identify the purpose of an earnest money deposit, which is to show a seller that a buyer is serious about purchasing a property. When the transaction is finalized, the earnest money deposit […]

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Doers Vs. Dreamers

People with aspirations can, in general, be split into two groups: 1. Doers 2. Dreamers Doers make the world go ‘round. That said, dreaming isn’t all bad … and the truth is, most doers are also big dreamers. But the key is turning dreams into real-world action. You’ll never have the life you want — the career you want — the real estate business you want — if you spend your whole life just dreaming. You’re on my list and get my newsletter because you have dreams. You want to be a better real estate investor. You want to build a bigger real estate business. You want to grow your personal fortune. You want to live a better life. These […]

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5 Hidden Costs of Homeownership

Whether you’re planning on buying a property short term or long term, there are costs of homeownership you should prepare yourself for ahead of time. In addition to mortgage payments if you borrow money to buy the property, there are additional costs that property owners often don’t expect. Here are 5 additional costs of homeownership you should expect to pay when you buy property. 1. Property Taxes When you rent, you are not responsible for the property taxes on the property, but when you become a homeowner, you’re expected to pay property taxes, so when you’re trying to determine what your property payments will be for the year, the quarter or monthly, don’t forget to factor in property taxes. 2. […]

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Stop Procrastinating & Finally Make It Happen

With a new year comes another set of New Year’s Resolutions You know, classics like •“This year, I’m going to get out of debt and save money.” •“This year, I’m going to lose 25 pounds and get in shape.” •“This year, I’m going to finally make some money in real estate.” The problem with New Year’s resolutions is that they rarely have a real plan behind them. The important question to ask yourself is HOW are you going to lose 25 pounds or finally make some money in real estate? Do you have a written plan to get those things done? Without a plan with tangible, measurable goals that you can work toward every day, it’s easy to fall victim […]

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End Of Year Real Estate Tax Tips Part 2

Gerald Lucas here, with part 2 of my end of year real estate tax tips.  Let’s first recap the 1st three end of year real estate tax tips I’ve already provided to you in my last episode: 1) Consider deferring income 2) Take some last minute tax deductions 3) Account for refinancings Tax Tip #4. Prepay quarterly estimated state tax payments. Consider paying your fourth-quarter estimated state income taxes and any outstanding balance by December 31. Your payments will be tax deductible for this tax year if you’re not subject to the alternative minimum tax (AMT). Tax Tip #5. Contribute the maximum to retirement accounts There may be no better investment than tax-deferred retirement accounts because they compound over time […]

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The Gift Of Anticipation

Few days bring as much anticipation as Christmas Eve, especially for children who lie awake at night, waiting to get up at the crack of dawn to tear open their presents under the Christmas tree. The truth is that anticipation is a big part of fun for everyone. Pleasant anticipation is an important source of happiness. Having something to look forward to makes us feel good and creates a healthy atmosphere based on positive expectations. There are four key stages we experience when we enjoy an event: 1. Looking forward to the moment 2. Enjoying the moment 3. Sharing the moment with others 4. Looking back on the moment Having something to look forward to brings happiness into our lives […]

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End Of Year Real Estate Tax Tips Part 1

Many of you have been asking me for real estate tax tips as we get closer to the end of the year, So here are a few helpful end of year real estate tax tips: Tip #1. Consider deferring your income Income is taxed in the year it is received – so it may be advantageous to delay paying tax until tomorrow rather than paying it today particularly if you expect to be in the same or lower tax bracket next year. Your situation may vary depending on if you are an employee or if you are self-employed. If you are an employee, for tax purposes, you may want to consider deferring a year-end bonus until next year. If you […]

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How To Protect Vacant Property From Thieves

Q: Gerald, I just bought my first vacant rehab property. How should I protect the property from thieves while I do the renovation? Phil, Mahwah, NJ A: That’s a good question, Phil. What I’m going to do right now is give you 3 ways to protect a vacant property: Alarms: Install an electronic alarm security system. Alarms will deter individuals from attempting to enter your building and will quickly alert authorities if someone does break in. Live Security: this can be a security company that patrols the area around your property or an intimidating Dog you put in the property or having someone like a handyman live temporarily in the property. Lighting: Motion-activated lights and general lighting can help protect […]

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Turn Negative Thoughts Into Positive, Productive Energy

In spite of our many blessings, it’s easy to fall victim to negative thinking. Unfortunately, negative thoughts distract you, drain you of energy and keep you from being in the present moment. The more you give into your negative thoughts, the stronger they become. On the flip side, a small positive thought can have the opposite effect, blossoming into a positive and profitable outcome. When you start to have negative thoughts, it’s often hard to stop them. Shifting your focus from negative to positive thoughts is easier said than done, but it’s the only way to avoid going down an unnecessarily painful path. When you find your thoughts tumbling down a negative slippery slope, here are 5 tips to turn […]

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I Appreciate You! Happy Thanksgiving.

I want to wish you and my entire Real Estate Insider Family a warm message of Thanksgiving. I cannot tell you enough how much I appreciate YOU. A single expression of gratitude is never really sufficient, so Thank You, Thank You, Thank You … that’s Thank You to the power of three for all you math aficionados! In our fast-paced world, it’s easy to take things for granted, but I have so many things to be thankful and grateful for … including a happy, healthy and loving family, supportive friends, amazing coaching students, consulting clients, and business partners. I’m grateful for the lifestyle that real estate has afforded me over the last 15 years I’ve been actively investing. I’m thankful […]

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How Do I Get the Most Money for My Property Insurance Claim?

Q: Gerald, there was a fire in one of my rental properties.  I have insurance, but I’ve heard terrible stories about insurance companies ripping off homeowners.  How do I get the most money for my property insurance claim? Stacy, Toms River, NJ A: Stacy, I hear you loud and clear.  One of my first jobs was working as an actuary at an insurance company.  Insurance companies unfortunately do rip insureds off sometimes–their goal is to collect as much money in insurance premiums as possible and then pay out the lowest amount in claims. Here are 3 tips to help you get the most money from a property insurance claim: 1) carefully review your coverage 2) document damage with photos and […]

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How to Decide to Flip or Rehab a Home?

Q: Gerald, I have a property under contract to buy. I looked at all the numbers and I’m confident that it’s a good deal, but I’m not sure whether I should wholesale the property for a quick profit or rehab and then sell the property. Billy, Columbus, Ohio A: That’s a great question, Billy–this is something that I grapple with all the time myself as a full time investor–should I flip a property as is or take the time and money to rehab it and ideally make a bigger profit? When I make that decision, here are 3 factors I consider: 1) time of year 2) how many other rehab projects I have going on & most importantly 3) how much […]

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What If I Run Out Of Money Doing A Rehab?

Q: Gerald, I’m doing my first rehab and it’s costing me more money than I initially thought.  What should I do if I run out of money in the middle of the rehab? Sunny, Garwood, NJ A: Sunny, rehabs normally end up costing more money than you initially expect, which is why it’s always a good idea to build in a cushion when you do your planning for cost overages.  In your case, since you’re already in the middle of rehabbing, the best thing to do is take an honest look at all the additional renovations that you were planning to do and prioritize them.  In other words, determine the most important items that need to be repaired or replaced to make your property marketable and […]

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How Long Should It Take To Rehab A House?

Q: Gerald, I’m trying to raise private money to fund my first rehab project. One of the questions one of my private lender prospects asked me was how long it will take to do the renovation. How long should it take to rehab a house? Josh, Garfield, NJ A: That’s a great question, Josh.  The amount of time it will take the renovate your property will depend on a number of factors including how much work needs to be done to bring the property up to the standards of the neighborhood where it’s located.  The time of year may play a role in how long it will take to renovate because renovations can be more problematic and time-consuming during winter […]

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The Number One Sign Another Investor is Trying to Steal Your Wholesale Deal

Q: Gerald, I’m trying to wholesale a property I have under contract to buy.  I want to protect my deal from other investors who may try to go around me and steal it from me.  Got any advice for me? Carmen, Reading, PA A: Hi Carmen, this is one of the most frequent questions I get from investors working on their first wholesale real estate deal .  What I’m going to do is give you the #1 sign that another investor may be trying to steal your wholesale deal. Before I give that to you I want to make sure you are on solid ground yourself.  The first question to ask yourself is: do you really have a good real […]

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How Much Upfront Money Should I Give a Contractor Before He Starts Working?

Q:  Gerald, I hired a contractor to renovate our kitchen and bathroom.  The first 2 guys I spoke with wanted half of the money upfront.  How much upfront money should I give a contractor before he starts working? Robbie, Passaic, NJ A:  That’s a great question, Robbie and as a full time real estate investor myself, it’s an issue that I deal with all the time.  So, how much money should you give a real estate contractor before he starts working?  The answer is as little money as possible.  If you’ve been burned by contractors in past like most of us investors have who’ve been in the business for a while, you’ll understand why. As investors, we ideally would like […]

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Should I Get an Adjustable-Rate Mortgage?

Q: My mortgage broker told me that it would be easier for me to qualify for an adjustable-rate mortgage. Should I get an adjustable-rate mortgage? Monica, Peekskill, NY A: Monica, your mortgage broker is correct that it will probably be easier for you to qualify for an adjustable-rate mortgage than a fixed rate mortgage, but just because it’s easier to qualify doesn’t mean that it’s a good idea. Just for the record, the mortgage payments on a fixed-rate mortgage stay flat and consistent throughout the life of your loan whereas the interest rate is subject to change on an adjustable-rate mortgage–therein lies the potential danger. When you get an adjustable-rate mortgage, you are gambling on your ability to pay a […]

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Is My Credit Score Good Enough to Get a Mortgage?

Q: I’m at the point in my life where I want to buy a home. Is my credit score good enough to get a mortgage? Caroline, Tinton Falls, NJ A: Caroline, your correct that your credit score is the number that lenders use to estimate the risk of lending you money and is a key factor in determining whether you will get approved for a mortgage. However, many lenders view your credit score as just one piece in the puzzle, so a low score won’t necessarily prevent you from getting a mortgage. You can be approved for a mortgage with a lower credit score if, for example, you pay a big down payment and don’t have much other debt in […]

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Should We Rent Our Home or Sell?

Q: Gerald, my company is relocating.  We’re moving, so should we rent our home or just sell it? Brenda, Livingston, NJ A: That’s a great question, Brenda.  I want you to consider 3 factors in making your decision on whether to try to rent or to sell your home: 1. What’s the rental demand for your home?  You need to make sure there’s adequate demand to rent your place.  If there isn’t, then renting isn’t a viable option. 2. Will rental income realistically cover and ideally exceed all the expenses on your current home (property taxes, mortgage payments, insurance cost, repairs etc.)?  If you’re losing money every month, then it probably doesn’t make sense to rent and deal with all […]

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How Do I Get the Lowest Mortgage Rate?

Q: I recently got a mortgage loan quote, it’s higher than the national mortgage rate I saw posted everywhere. What gives? How do I get the lowest mortgage rate? Jeff, Hillsdale, NJ A: Good question, Jeff.  When you see a very low loan offers or hear about the latest movement in interest rates in the media, take it with a grain of salt. Lenders price your loan with adjustments based on certain risk factors including: Your middle credit score Your loan size (how much money you’re borrowing) The loan product you qualify for The purpose of your loan (i.e. whether you are buying or refinancing) Whether you plan to live in the property or not So, the the riskier your […]

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Timeshare Or Vacation Home-Which Is A Better Investment?

Q: My husband and I are debating whether to buy a timeshare or vacation home? Which is a better investment?  Beth, Riverdale, NY A: That’s an interesting question, Beth.  When we compare a vacation home to a timeshare, the difference is essentially full time versus part-time ownership. A vacation home requires full-time ownership which includes maintenance and upkeep year round but gives you more flexibility than a timeshare to use whenever you want rather than just on a particular week when you may not be available. Although a timeshare has limits on when you can use it, timeshares tend to be more affordable than buying a vacation home and work best for you if you know exactly when you’ll take […]

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3 Signs A Real Estate Attorney Is No Good

Q: I’m looking for a good real estate attorney because I’m buying a home. I’ve met with several attorneys so far, but they all kind of seem the same. I know there are some really bad attorneys out there-what signs should I look for to eliminate the bad apples? Jackie, Hagerstown, MD A: Jackie, I understand your challenge in trying to separate out the bad real estate attorneys.  What I’m going to do is give you 3 signs a real estate attorney is no good: Attorney promises positive results in advance.  Unless the real estate attorney you are talking to is Nostradamus, he cannot foretell the future, which means that he or she can’t promise you specific results in advance.  […]

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3 Signs A Realtor Is Incompetent

Q: Gerald, my wife and I are looking for a good Realtor to sell our home. Our next door neighbor had a bad experience with a realtor when they sold their home–how can we avoid that happening to us? James & Susan, Morristown, NJ A: James & Susan, I hear you loud and clear. To help you avoid working with losers, I’m going to give you 3 signs that a realtor is incompetent: Realtor lacks experience. Having prior experience is important particularly if and when a real estate transaction doesn’t go according to plan. If you can, you and your wife should avoid being guinea pigs and allowing your realtor learn their craft while they’re working with you. The Realtor […]

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What Repairs Should I Do Before I Sell My Home?

Q: I’m selling my house now. What repairs should I do now before I sell? Sam, Rockville, MD A: Sam, capital improvements in general only add about 50% of their cost to the value of your home, which means that they are normally a waste of money unless the repair issue is so important that it could scare away buyers. A roof leak so bad that when it rains outside, it rains inside your house or a bathroom or kitchen that hasn’t been updated since the 1970s may be good examples of repairs that you’ll need to do in order to make your property salable. However, if your home is livable and presentable, then unless you are a contractor, it’s […]

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Identify Things You Can And Cannot Control

Identify Things You Can And Cannot Control Do you ever worry about things that are beyond your control? Unfortunately, worrying creates physical and mental problems without providing any benefits. People often worry about both the past and the future instead of focusing what they can do in the present. There’s nothing you can do about the past—the clock can’t be turned back. Worrying about what might happen in the future is equally futile and creates mental monsters that can paralyze you. The truth is that there are some things that you have no control over and others that you have complete and total control over—knowing the difference and then acting on that realization is one of the keys to personal […]

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If Something is Wrong with My Home When I Sell, What Should I do?

Q: If something is wrong with my home when I sell, what should I do? Tim, Teaneck, NJ A: Tim, normally when you sell your home, you are obligated to disclose problems that could affect the property’s market value.  In most states it’s illegal to conceal major physical defects in your property.  For the most part, you’re only responsible for disclosing information that you are aware of. The extent to which you are responsible for finding defects in your home when you sell varies from state to state, so I strongly suggest you consult an experienced local real estate attorney and your state’s real estate commission or board to confirm disclosures you’re responsible for making. Thanks for your question, Tim, […]

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What Price Should We Sell Our Home For?

Q: We’re about to sell our house. What price should we sell our home for? David & Danielle, Knoxville, TN A: Great question, David & Danielle. Everyone wants to get the highest price possible for their property when they sell it. Few people know how critical the way you price your property is to getting the highest price when you sell it. Here are 3 tips that will help you price your home so you can get top dollar for it when you sell it: Go out and look at similar properties for sale in your neighborhood. This will allow you to see what the eventual buyer of your house will see when they are out looking for properties to […]

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First Thing to Do if Your Mortgage Application is Denied

Q: My mortgage application was denied. What can I do? Lloyd, Union, NJ A: Lloyd, it’s not the end of the world just because your mortgage application was denied. Lenders reject about 50% of refinance applications and about 30 percent of buyers who apply for a mortgage loan. Keep in mind that different lenders have different requirements, so you can apply with another lender or mortgage broker. It probably makes sense to try to find out why your mortgage application was denied—so ask. Also, the denial may not be based on you as a borrower, it may be the property itself, so go back to the lender or broker and find out why your application was denied, then take concrete […]

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How to Win a Home Bidding War

Q: Our local real estate market is really hot. We keep getting outbid for homes we want to buy. Do you have any advice on winning a home bidding war? Kate, Summit, NJ A: Hi Kate, I’m sure it’s frustrating to pick a house you like only to lose it to someone else. As far as bidding wars go, the first and most important piece of advice I’ll offer you is 1) set your financial boundaries before you start making offers to purchase—this will protect you from paying too much in the heat of the moment. 2) The second tip is to start strong & serious—you do not want to look like a tire-kicker in a home bidding war 3) […]

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Work Fun Into Every Day

Summer is finally here! From backyard barbecues to beach trips, we associate summertime with having fun. Special summer moments remind us how important it is to have fun and play. When we reach a certain age, we often begin to starve ourselves of play. This comes at a huge cost, given the many important ways our brain and senses benefit from play. Play provides nourishment for both our body and our spirit. Recent Japanese research found that spending as little as two hours a month laughing or listening to your favorite music has as big an impact on blood pressure as eliminating salty foods, or even losing 10 pounds. Having fun is also a great creative engine that boosts our […]

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Buy a Home or Rent: 3 Key Factors You Need to Decide

Q: I’ve been paying rent for years now and have nothing to show for it. Real estate prices in my area seem to be going up, so should I buy now or keep renting? Kelly, Hoboken, NJ A: That’s a great question, Kelly. Although there are many tax benefits and wealth-building benefits to owning property, it’s important that you make financial decisions that are best for you based on your individual goals and your personal financial situation. With that in mind, here are 3 key factors that you should consider in deciding whether to buy now or continue renting: 1) What you can reasonably afford (this trumps all other factors and concerns) 2) How long you plan to stay—there are […]

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Become the Architect of Your Future

All of us dwell on the past from time to time. As we live our lives, it’s only natural that we sometimes cling to what once was. But when our desire to cling to the past affects our future, we begin an unhealthy battle with anchors that can hold us down and sink us. Dwelling on mistakes gives power to the past and can perpetuate behavior we may want to change. When you think about it, everything that happens occurs in the present. Memories of events are thoughts occurring in the present. Anger or hurt about the past is happening now. What’s amazing about this understanding is that it shows you that the way out of your suffering is always […]

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How Much Should Closing Costs Be on a Mortgage Loan?

Q: How much should closing costs be on a mortgage loan? Henry, North Bergen, NJ A: The closing costs associated with a mortgage are usually different for each customer based on the type of mortgage they get, the property location and the amount of the loan. Mortgage loan closing costs may include appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees – to name a few. During the process of getting a mortgage, you are supposed to receive a good faith estimate which itemizes your closing costs in advance of your closing date, so it’s important that you review your good faith estimate to make sure you aren’t being overcharged. Thanks for your question, Henry, good luck. […]

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How Long Should it Take to Get a Mortgage Loan?

Q: How long should it take to get a mortgage loan? Veronica, Flushing, NY A: Well that’s a good question, Veronica. Mortgage approval is a multi-step process which includes underwriting, which can take some time. The lender or mortgage broker you choose and the number of applicants they have in their pipeline will impact how long it takes to get a mortgage as well as your individual financial situation. If, for example, your financial condition is very simple and straight-forward (i.e. your employment is stable and have no debt) the process will generally be faster and can take just a few weeks. However, if you’re situation is more complicated (i.e. you’re self-employed, own several other houses, have gone through a […]

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What Interest Rate Should You Pay for a Hard Money Rehab Loan?

Q: What interest rate should you pay for a hard money rehab loan? Victor, Dix Hills, NY A: That’s a great question, Victor and it’s one I hear all the time. The interest rates on hard money rehab loans vary a little from lender to lender, but generally speaking, the interest rate charged falls within the same range (12-15%). However, there’s a lot more to consider than just the interest rate you pay when you borrow money to renovate a property. The more important question is regarding the terms of the hard money loan itself, specifically, whether you have to make monthly or quarterly payments on the loan before you sell the property, whether the loan requires a personal guarantee […]

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Do LLCs Protect Property Owners From Personal Liability?

Q: Do LLCs Protect Property Owners From Personal Liability? Eric, Edison, NJ A: That’s a great question, Eric. As you may know, LLC is an acronym that stands for limited liability company. An LLC is a business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation. LLC owners generally are protected from personal liability for business debts and claims, which means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can’t reach the personal assets of the LLC owners. However, LLC owners can lose this protection by acting illegally, unethically, or irresponsibly. So, to answer your question, Eric, it really […]

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3 Things Warren Buffett Taught Me About Real Estate

Q: As a real estate investor, why do you go all the way to Omaha, Nebraska every year to attend Berkshire Hathaway’s shareholder meeting? Ken, New York City, NY A: Well, that’s a great question, Ken. I am a Berkshire Hathaway shareholder and huge admirer of both Warren Buffet and his business partner Charlie Munger, who are 2 of the greatest business minds that have walked the planet earth. I’ve been going to Berkshire Hathaway’s Annual Shareholder meeting in Omaha for many years. Although Warren Buffett is primarily known as a stock market investor, Berkshire owns a real estate brokerage and Charlie Munger was himself a successful property developer. I sincerely believe that you get smarter and wiser by studying […]

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5 Nightmare Home Problems Home Inspections Won’t Find

Q: Gerald, I set up an appointment with a home inspection company to inspect a property we are buying. What items does a home inspection cover or not cover? Janice, Charlotte, North Carolina A: Janice, I’m glad you plan to pay for a home inspection—that’s the smart choice. The focus of a home inspection is on 3 broad areas: the structural, mechanical and electrical condition of the property. So, your home inspection should uncover structural, mechanical or electrical problems in the property you’re buying. However, the inspection is not designed to detect all flaws or problems that might exist in a home. I’m going to list 5 items a home inspector’s standard practice typically does not include: 1) Asbestos 2) […]

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How much should I pay for a home inspection?

Q: Gerald, as we continue to search for a house, we’ve decided to take your advice and pay for a home inspection. How much should we pay for a home inspection? Brook, Flanders, NJ A: Brook, you’re smart to get a home inspection. The cost of doing a home inspection will vary from place to place, but I’ve found throughout the US, most home inspections cost between $350 and $550. I’d shop around, but the experience and competence of the inspection company is more important than the cost. I’ve been investing in real estate for 15 years and I still pay for home inspections when I buy just to benefit from another set of eyes. You may be able to […]

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How long do I have to do an inspection when I buy a home?

Q: Gerald, I’m about to sign a contract to buy a home.  How much time do I have to do a home inspection?  Harry, Chatham, NJ A: Good question, Harry.  The amount of time you have to do a home inspection normally depends on what’s written in the contract that you sign.  Purchase contracts for real estate usually include what is called an inspection contingency. For the record, home inspection contingencies are handled differently in different states in the US, so check the local customs and laws in the area you are planning to purchase your property.  The home inspection contingency allows a home buyer to cancel the sale or try to negotiate repairs based on the results of a […]

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What to Do if There’s an Oil Tank at a Property You’re Buying?

Q: Gerald, my wife and I found a home we want to buy but it has an oil tank buried in the front yard. What should we do? Evan, Jersey City A: Good question, Evan. The first thing you should do if you’re buying a property with an oil tank is to do a soil test to check for contamination. There are underground oil tank inspection companies that specialize in this so it shouldn’t be hard for you to find a company in your area to do it. In addition to doing the soil test, to be safe, I would suggest removing the oil tank altogether before you close on the property. When you remove an oil tank, you want […]

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3 Qualities That Make A Good Real Estate Attorney

Q: Gerald, I’m buying a property and trying to decide which real estate attorney to use. What should I be looking for? Dan, Saddlebrook, NJ A: That’s a great question, Dan. If you haven’t dealt with many real estate attorneys I can imagine they all probably seem the same to you. What I’m going to do is give you 3 qualities you should look for in choosing the right real estate attorney: 1) Real Estate Specialization: does the attorney specialize in real estate or are they a jack-of-all trades. In general, you want someone who specializes in real estate law, in the same way if you needed surgery, you’d probably want to choose a doctor who specialized in surgery rather […]

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3 Ways Fixed-Rate Loan Payments Can Rise

Q: I have a 30 year fixed rate mortgage, but at the beginning of this year, my monthly loan payment went up—how can my payment increase if I have a fixed-rate mortgage? Sarah, Washington, DC A: That’s a great question, Sarah. Although you have a fixed-rate mortgage, Sarah, which means that your interest rate can’t change, your monthly mortgage payment is normally comprised of other items that can change. I’m going to give you 3 Ways Your Fixed-Rate Mortgage Payments May Go Up: 1. A change in the escrow balance your bank charges you can affect your monthly payment. 2. A change in the cost of your property insurance can affect your loan payment if insurance is bundled into your […]

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3 Ways Contractors Can Steal From You

Q: I gave my contractor money to buy materials for a job he was going to do for me on my rental property—he won’t return my phone calls and seems to be avoiding me.  What should I do?  (3 Ways Contractors Can Steal From You) Elliott, Deer Valley, NY A: Elliott, unfortunately, if you are a real estate investor and employ contractors to work on property for you, there will probably come a time when you get ripped off by a contractor.  I definitely have been ripped off before, so I know the painful feeling.  Here are 3 ways that contractors can steal from you: 1. The first way is what seems to have happened to you—the contractor collects money […]

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Reverse Mortgages

Q: Are reverse mortgages a good idea? (3 disadvantages of reverse mortgages) Sandy, Chicago, Illinois A: As with most financial decisions, the right answer to whether a reverse mortgage is a good idea or not depends on your individual circumstances and goals. Since there are so many commercials on TV singing the praises of reverse mortgages, in order to provide some balance, I’m going to give you 3 disadvantages of reverse mortgages: 1)High Fees: The upfront fees (closing, insurance and origination fees) for a Reverse Mortgage are fairly high–higher normally than the cost of refinancing a mortgage loan for example. 2) Even though you no longer have to make mortgage payments, you still have additional costs associated with your home—you […]

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How do I prevent pipes from freezing in my home?

Q: How do I prevent pipes from freezing in my home? Phil, Manasquan, NJ A: Winter time in colder parts of the US unfortunately means dealing with the risk of pipes in your home or property freezing and bursting. I’m going to give you 5 tips to help prevent pipes in your property from freezing: 1. Wrap pipes near exterior walls and in crawl spaces with pipe insulation or with heating tape. 2. Keep your home heated when it’s cold even if you’re going away or leaving the house for a long period of time. 3. Open cabinet doors below sinks to allow heat from the home to circulate. 4. Cover or close open-air vents because freezing temperatures combined with […]

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Home pest infestation red flags

Q: Gerald, my daughter found tiny wings on the windowsill of our home-is it termites? -Ed, Stamford, Ct A: Hi Ed, You can often spot pest infestation in your home by looking closely at windows and baseboards. Insects like termites shed wings on walls and windowsills and carpenter ants often leave sawdust along baseboards. If your daughter found tiny wings, it may very well be termites. Time to call an exterminator. These types of infestations can be very costly if left unchecked and termites can actually cause structural damage to your property. So you should get an exterminator in as soon as possible. Thanks for your question, Ed—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. […]

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Hidden home water damage red flags

Q: The bathroom floor in one of my rental apartments is spongy—what’s causing this? -Maria, Woodbridge, NJ A: Maria, the sponginess of your bathroom floor was probably caused by excess moisture in the bathroom. Excess moisture over time can create mold which can be hazardous to your health and can ruin flooring. There may be hidden water damage in your property near ceilings and in and around bathrooms. Excess moisture can come from a leaky toilet, a broken shower spout or a roof leak—it’s best to address these issues immediately by making necessary repairs or getting a dehumidifier because over time water can cause structural damage to your property. Thanks for your question, Maria—good luck. For more real estate tips […]

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Property Foundation Crack Red Flags

Q: Should I care about a foundation crack in my home? -Eugene, Harrisburg, PA A: Good question, Eugene. Cracks in the foundation of your home that are wider than 3/16 of an inch can be very serious. If you do have a foundation crack that’s wider than 3/16 of an inch you should immediately seek the assistance of a structural engineer to check things out. The longer you let structural problems in your house fester, the more expensive the remedy often is. Thanks for your question, Eugene—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. I’m Gerald Lucas and I’ll see you again soon.

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Can you write off home improvements on taxes?

Q: Can we write off our home improvements on our taxes? (IRS loophole that helps finance home repairs) Eli, Parsippany, NJ A: Good question, Eli. The IRS gives special tax treatment to certain types of loans for home improvements. Single filers can deduct up to $500,000 and married filers up to $1 million dollars of mortgage interest that’s used to buy, build or improve a first or second home. This may allow you to deduct interest paid on home repairs and improvements if for example you use a home equity line of credit to pay for the repairs. Thanks for your question, Eli—good luck. For more real estate tips and information, visit geraldlucas.com or performanceproperty.com. I’m Gerald Lucas and I’ll […]

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The first thing you must do before negotiating a real estate contract

Q: I want to make an offer on a property I found, should I start by just throwing out a price? (The first thing you must do before negotiating a real estate contract) Lily, Woodbridge, NJ A: That’s a great question, Lily. If you can deal directly with the seller of the property (sometimes you can sometimes you can’t) the first thing you want to do is ask lots of questions and try to build rapport with the seller. A successful negotiation is one where both parties are satisfied and happy to move forward—creating a win-win situation requires identifying what’s most important to both you and the other party and then writing down points you can both agree on. This […]

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How much down payment should you pay when you buy a property?

Q: How much down payment should you pay when you buy a property? -Heather, Babylon, NY A: There are lots of people who say that when you buy a property you should put down as much of a down payment as possible—some people say 20%, 25%, even 50%. I understand why people like Suze Orman, for example give that advice—it’s because your monthly mortgage payment will be lower if you pay a bigger down payment when you buy a property—that’s very logical and makes sense. Unfortunately, everyone, particularly 1st time home buyers don’t have a 20% down laying around to put down on a property particularly in higher price real estate markets. Another thing to consider is that money that […]

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How Much Profit You Should Make If You Flip A Property?

Q: How Much Profit You Should Make If You Flip A Property? Stuart Chicago, Illinois A: That’s a question I get a lot from my coaching students, Stuart. While there is no universal set profit amount that’s etched in stone that a real estate investor should make, your profit should be worth the time and effort you put in. The more work you have to do, the more profit you should require as an investor before you make a yes or no decision on a property. It’s also important to understand the right relationship between property price and your profit. So, in general the more you pay for a property, the more profit you should make—because risk and reward go […]

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The 3 Keys To Buying Property That Will Make You The Most Money

Q: Which properties will make me the most money? (The 3 Keys To Buying Property That Will Make You The Most Money) June, Freeport, NY A: Good question, June. There are many factors that play into whether you’ll make money on a property you buy, but here are 3 key ones: 1. Picking the right area/neighborhood/street. This is critical because the right area will make your property more attractive to tenants if it’s a rental property and more attractive to buyers whenever you choose to sell your property 2. Picking the right kind of property-based on your budget (what you can afford to buy and maintain while you own it) and your exit strategy—exit strategy just means what you ultimately […]

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How much in real estate expenses can I write off on my taxes every year? Part 2

Q: How much in real estate expenses can I write off on my taxes every year? Part 2 (The 4 types of real estate investor definitions/classifications that the IRS has) -Pete, Caldwell, NJ A: In our last installment, Pete from Caldwell, NJ asked how much in real estate expenses could he write off every year and I said that he could write off as little as up to $25,000 and as much as however large his real estate loss is depending on his IRS classification—this is because the amount of real estate expenses that Pete can write off every depends in part on how the IRS categorizes him and his real estate activities. What I’m going to give you now […]

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How much in real estate expenses can I write off on my taxes every year?

Q: How much in real estate expenses can I write off on my taxes every year? (Part 1) -Pete, Caldwell, NJ A: That’s a good question, Pete. The answer to your question is that you can write off as little as up to $25,000 and as much as however large your real estate loss is depending on your IRS classification. The amount of real estate expenses that you can write off every year on your taxes depends in part on how the IRS categorizes you and your real estate activities. In my next installment I’ll take this question further and reveal the 4 types of real estate investor definitions/classifications that the IRS has. Thanks for your question, Pete. Good luck. […]

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Can I raise my tenant’s rent every year, and if so by how much?

Q: Can I raise my tenant’s rent every year, and if so by how much? Carrie, Bloomfield, NJ A: The key to being an effective landlord is knowing your local real estate market, where it is and hopefully where it’s going. While landlords would always like to raise their rents to increase their profits and sometimes to offset increases in their expenses, the market ultimately decides how much rent you can charge. If you charge too much rent relative to similar properties in your area, your property will sit vacant or your existing tenants may move out if they know they can pay cheaper rent for similar digs somewhere else. For this reason I strongly recommend that you monitor market […]

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The Power of Gratitude: Why Thanksgiving Matters:

Every year, millions of Americans gather for Thanksgiving to celebrate family, friends and connection. Thanksgiving is more than just a cultural tradition, however, and science now shows that celebrating Thanksgiving and practicing gratitude can elevate our levels of happiness. Gratitude enriches human life and mental well-being. Gratitude increases self-esteem and increases your energy levels. Gratitude elevates, energizes, inspires and transforms. Gratitude strengthens relationships, reduces stress and improves health. So how does gratitude improve health? On one level, it helps people to sleep better. A 2009 study of 401 people— 40% of whom had clinical sleep disorders— found that the most grateful people had better sleep quality, normalized sleep duration (not too long or too short), were able to fall asleep […]

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Estimate home insurance cost

Q: I’m trying to budget for my expenses this year. Is there a way for me to estimate the cost of homeowner’s insurance? -Gary, Wilmington, DE A: Gary, insurance rates vary a lot from place to place. But, there is a broad rule of thumb you can use to get a rough estimate of your annual homeowner’s insurance which is to divide the value of the home by 1,000 and then multiply the result by $3.50. Again, as I said, this will only give you a very rough estimate, and your premium will depend on where your house is located and other factors like how much insurance coverage you get—so I suggest to find out for sure you get a […]

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What are the 3 most overlooked home expenses?

Q: I’m buying a home after years of renting, what are the new expenses I need to be concerned about ? -Patricia, North Bergen, NJ A: That’s a good question, Patricia. I’m a big proponent of home ownership, there are many benefits that make it worthwhile, however, there are expenses that you’ll have to begin taking care of when you buy a home. Here are the 3 most overlooked real estate expenses: 1. Property Taxes Property taxes can be demanding because even if you’ve paid off you mortgage, you still owe what amounts to a monthly fee to the town or the municipality in which you reside. Remember, the bank doesn’t decide your property tax, the town or city where […]

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When is the best time to sell a property?

Q: Gerald, when is the best time to sell a property? Gail, Rye, NY A: Gail, home buyers generally tend to come out in droves during the spring. Also, spring buyers with recently received tax refund checks in their bank accounts pay full price more often than at other times of the year. This may explain why more than half of those who move do so in the summer. Regardless of what time of year you choose to sell, the key to getting top dollar for your property is pricing—you must price it to sell, if you overprice a property it will most likely sit on the market regardless of the time of year. Thanks for your question, Gail. Good […]

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When is the best time to buy a property?

Q: Gerald, we’re thinking about buying a property. When is the best time to buy a property? Neville, Princeton, NJ A: Neville, the best month to make an offer on a house is January. Fewer buyers are willing to house-hunt during the winter, so there’s less competition and fewer bidding wars. Sellers also tend to be more motivated than they will be in the spring, when there are more buyers. This may be because they’ve just received their credit card statements after a Christmas spending spree and are feeling the need to tighten their financial belt. Plus, their decision to try to sell their home in the winter means they’re willing to risk listing during a time of the year […]

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What’s the best legal entity to buy a property in?

Q: What’s the best legal entity to buy a property in? -Scott, Georgia A: In my opinion, an LLC, which stands for limited liability company is the best legal entity to buy property in because LLCs provide both liability protection and tax flexibility. In addition, I’ve found LLCs to be easier and cheaper to set up and maintain than other legal entities. Owning an LLC will require you to adhere to certain corporate formalities like preparing meeting minutes on a regular basis. As I said last time, it’s also a good idea to consult an experienced CPA and real estate attorney before you make a final decision. Thanks for your question, Scott. Good luck. For more real estate tips and […]

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Should you buy property in company name?

Q: I’m looking at rental properties to buy in my area. I’ve heard people say that you should never buy a property in your own name. Is it better to buy an investment property in your name or in a company name? -Scott, Atlanta, GA A: That’s a great question, Scott. When you buy an asset like real estate in a separate legal entity rather than in your own name, it does provide you with extra liability protection. However, buying a property in a company name does often limit the kind of financing you can get. Sometimes, for example, if you purchase a property in a short sale transaction, the bank won’t allow you to buy in a company name. […]

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Mortgage Broker Or Bank Which Is Better?

Q: We’re in the market for a new home. Should we go to a bank or use a mortgage broker to get a home loan? (Mortgage Broker Or Bank-Which Is Better?) Vincent, Union City, NJ A: That’s a great question, Vincent. The first place people normally turn when they want to get a mortgage is their local bank, normally because it’s the first thing that pops into their mind. However, most people want to get the lowest interest rate and best loan they possibly can when they buy a property and I’ve found that mortgage brokers normally are better than banks. The reason is simple, mortgage brokers work with a variety of lenders not just one, so they can shop […]

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3 Bad Tenant Warning Signs

Q: Gerald, we finally got rid of a terrible tenant in our rental property-he didn’t pay for months and he tore the place up. We’re looking for a new tenant now, how can we avoid another disaster? -Patrick, Orlando, FL A: Sorry to hear about your trouble, Patrick. As a long-time landlord myself, I can certainly relate. What I’m going to do is give you three warning signs of a potential bad tenant: 1) The prospective tenant is in a hurry to move in right away-this often is because they just got kicked out of their last place. The key is to have rules and regulations and to stick to them. Never allow yourself to be rushed through your own […]

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Don’t Get Ripped-Off On A New Roof. Gerald Lucas reveals

Q: How To Avoid Getting Ripped Off On A New Roof? Chris, Memphis, Tennessee A: Continuing from our last discussion on roof replacement based on Chris’ question, I’m going to give you some tips for finding a good roofer and protecting yourself with a solid contractor agreement. As I said in the last installment, a roof is one of the most expensive items to replace in a home. I suggest getting at least 3 quotes, from licensed contractors—you can probably get someone without a license to do the work cheaper but you’re taking a big risk that I wouldn’t recommend—I’ve cut corners before on houses that I’ve had renovated before and paid the price for it later. Getting referrals from […]

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How much does it cost to replace a roof?

Q: I’ve been dealing with lots of roof leaks lately. When it rains hard, I sometimes have to put a pot down on the floor to catch all the water. How much does it cost to replace a roof? Chris, Memphis, Tennessee A: Good question, Chris. A roof is one of the most expensive items you’ll ever replace on a home, so I can understand why you’d want to know how much it’s gonna cost. I’m in the process of replacing a roof on a building I bought 8 years ago right now, so I know where you’re coming from. The first thing to consider is that material and labor costs will vary enormously from place to place- because it […]

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3 Ways to Lower Homeowners Insurance

Q: When I was saving and planning for our first home, I overlooked the insurance cost. Now with principal, interest and property tax payments, our family is stretched thin financially. How can we lower our homeowner’s insurance cost? (3 ways to lower your homeowner’s insurance): 3 Ways To Lower Homeowner’s Insurance-Gerald Lucas reveals Shaun, Boise, Idaho A: Great question, Shaun. I’m going to give you 3 tips for lowering your homeowner’s insurance: 1) Shop around, don’t just take the first quote that you get. It’s better to use a broker or agent who can search for the cheapest policy out there. 2) Make sure you’re not over insured. Being under insured can be dangerous if your property is damaged and […]

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3 Ways To Lower Summer Utility Bills

Q: Gerald, we had a really rough winter and just when I caught a break from record heating bills, the summer is in full swing. Do you have any tips to lower my utility bills in the summer? Charlie, Chicago, Illinois A: Great question, Charlie. I’m going to give you 3 tips to lower your utility bills during the summer: 1) Clean air-conditioning filters every month and check your air conditioner once a year to make sure that it’s functioning property. People often ignore their air conditioning system until something goes wrong, then they end up having to buy a new unit instead of making minor fixes. 2) If you need a new air conditioner, buy an energy-efficient one—it’ll lower […]

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3 Powerful Real Estate Negotiating Tips

Q: Gerald, I’m looking at buying a home and because I’ve never seemed to have much luck negotiating when I bought a car, I’m nervous about the negotiation side of purchasing a property. Do you have any tips you can give me? – Larry, Sparta NJ A: That’s a great question, Larry and by the way it’s normal to be nervous about negotiating especially if you don’t have a lot of experience doing it-this applies to most people. There’s a myth about effective negotiating that a lot of people hold which is that being a good negotiator is about one person dominating and getting his or her way over the other person-that couldn’t be further from the truth. Effective negotiation […]

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Are Open Houses Necessary To Sell A Home?

Q: Gerald, We are selling our home. Our Realtor wants to do a Sunday open house—with 3 small children a dog and a cat, it’s a real inconvenience but I don’t want to get in the way of selling our home. How important is holding an open house to selling a home? (Are open houses necessary?) Maryann, Bethesda, MD A: Hi Maryann, that’s a great question. Realtors normally just do open houses to please home sellers or because they just buy into the misguided conventional wisdom that open houses are effective. Open houses are normally a huge waste of time. The truth is that houses sell primarily based on 2 factors: 1) a home buyer’s preference and 2) a home […]

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Can We Back Out of a Signed Purchase Contract?

Q: Gerald, my wife and I recently signed a contract to buy a home, but we just found another home we like much better. Gary, New Rochelle, NY A: Hi Gary, normally when you sign a contract you are bound to perform based on the terms of the contract. However, most standard real estate contracts contain contingency clauses that may give you room to back out. The 2 most common contingencies that appear in written real estate contracts are mortgage contingencies and an inspection contingencies. If, for example, your purchase contract has a mortgage contingency and you can demonstrate that you were unable to obtain a mortgage or if your contract has an inspection clause and the seller is unable […]

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New Bathroom Or Kitchen Which Is A Better Investment?

Q: Gerald, I just had twins and it’s clear to me and my husband that we need a bigger place to live. We were thinking about putting in a new bathroom before we sell our current house so we can fetch a higher price. How much will a new bathroom increase our home’s property value?

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Home Inspection Nightmares To Avoid

Q: Gerald, we’re in the middle of buying a house and recently got a very long, detailed home inspection report. We really like the property but aren’t sure which items we should ask the seller to take care of. Can you give us some advice on the most important items in the inspection report we should focus on? A: That’s a good question. To make things easy for you, it’s useful to distinguish between the items in the inspection report that are cosmetic versus potentially serious. Home inspectors often include cosmetic items in the inspection reports so that the reports are longer, have more pages and look to be more thorough than they really are. So, cosmetic items include suggestions […]

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Will A New Kitchen Increase Your Home Value?

Q: Gerald, my wife has been on me about renovating our kitchen. How much will a new kitchen increase our property value? A: Hi Doug, that’s a great question & it’s a question that I hear all the time. While it’s certainly true that if your kitchen is outdated or run down it will make your house much less desirable to buyers, however, it’s a bad idea to think of a home renovation like a new or updated kitchen as an investment-because as investments go, it’s a bad investment, because the returns are negative. When you make an investment, you normally want more money back than you put in, so if for example you invest $1, you’d like to get […]

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Houses or Stocks, Which Investment is Better?

Q: Gerald, I was watching one of those financial programs on TV the other day and one of the guests was saying that stocks have been proven to be a much better investment over time than real estate based on historical returns. Is that true? A: That’s a great question, Andrew. And just like you, I’ve heard people say that before also. The thing is that most of these kinds of studies & statistics that you will hear about the returns on real estate versus stocks are very misleading; for starters, they look at averages and your life isn’t made up of a set of averages, it’s made up of a specific set of things that happen to you that […]

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Ask Gerald: 3 Ways To Increase Rental Property Income

Q: Gerald, we’ve taken the advice you gave us and increased the rents in our apartment building a little bit every year. Is there anything else we can do to increase the income that our rental property generates? Carol & Bill, Seattle, Washington A: Thanks to both Carol & Bill for your question. Here are 3 ways to increase rental property income: 1. Charge separately for parking spaces on your property, if local zoning laws allow, (this does not necessarily have to be a current tenant—you can enter into an agreement to provide paid parking for non-tenants) 2. Add additional storage space in your building and charge for it, either as a la cart additional rental source for current tenants […]

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Ask Gerald: Should I Stage My House Before I Sell It?

Q: Should I Stage My House Before I Sell It? Tommy, Orlando, FL A: Good question, Tommie. My simple answer to your question is yes, you should stage your home if you can afford it. Staging helps make a home easier to sell because people buy on emotion and staging makes it easier for potential buyers to picture themselves in a home. When staging, little things matter (ambiance, appearance and lighting all count). Also, less is often more—you don’t have to go overboard furnishing every inch of a home, just the basics, neat and presentable—it’s a good idea to leave enough empty space for your buyers to imagine their belongings in the house.

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Ask Gerald: How Do I Rent My Property Fast?

Q: How do I rent my apartment fast? Charles, Montville, NJ A:That’s a great question, Charles for all of the landlords out there. The best way to rent your apartment fast is to offer it and advertize it for rent at a slightly lower price than your competition—that is other landlords out there trying to rent a similarly sized apartment in the same area where your apartment is. This may seem strange I know, because as a landlord you want to maximize your profit, and to do that you may initially think that a higher asking price for your apartment will accomplish that. Unfortunately, it normally doesn’t, because your potential tenants looking for an apartment are going to shop around […]

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Ask Gerald: How Much is My Home Really Worth?

Q: How much is my home really worth? Amy, Washington, DC A: Zillo, Trulia. Better than nothing, but to really find out the value of your property, you need to either get an appraisal or get a licensed Realtor with access to your local multiple listing service (MLS) to give you a comparative market analysis with recent sold price comparables. 90% of what goes into the current value of a residential property is what similar properties have sold for in the last 6 months—so the key to arriving at the most accurate estimate of your home’s current value is getting recent sold price comparables in your neighborhood and you can accomplish that by getting an appraisal or a comparative market […]

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Ask Gerald: Where is the Best Real Estate Market?

Q: Where is the best real estate market? Roger, Huntsville, Alabama A: Great question, Roger. I get this question all the time—the holy grail of real estate investing-how to find the best RE marketing to invest it. Most of the time, when you read an article about the best real estate markets to invest in, the writer is referencing an average like highest housing appreciation over the last year in a particular area or they may be referencing a prediction that someone has made about appreciation for the coming year. Unfortunately, the real world of RE investing isn’t quite so cut and dry because even within an area that are neighborhoods and streets that don’t follow the general trend. Also, […]

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Ask Gerald: 3 Ways to Reduce Rental Property Expenses

Q: We recently purchased a rental property. We’ve got an infant at home with another baby on the way. Our expenses seem to keep piling up, how can we reduce our rental property expenses? (3 ways to reduce rental property expenses)Darren, Fairfax, Virginia A: Great question, Darren, for all the landlords out there. Here are 3 ways to reduce rental property expenses: 1. Replace older toilets with more efficient low-flow models. Less water down the drain, means a lower water bill. 2. Tighten up your rental lease to make tenants responsible in writing for apartment damage 3. Separate the heating and the electric meters for each unit so that each renter pays their own heating & electric bill. Thanks for […]

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Ask Gerald: Written Lease or Month-to-Month Agreement, Which is Better?

Q: Is it better to have a written lease for a tenant or a month-to-month lease? Jason, Fort Wayne, Indiana A: Great question for all the landlords out there also for renters. A month 2 month agreement gives landlord and a tenant more flexibility and if you’re a landlord that may work to your advantage or disadvantage. If you have a good tenant, ideally you’d want to try to lock them into as long a lease as possible. If you have a bad tenant, a month-to-month lease gives you more flexibility to get rid of them, but remember, a tenant can cancel a month-to-month agreement with 30 days notice also. Screening your tenants is a best practice for successful landlords […]

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Ask Gerald: 10 Ways to Find a New Tenant Fast

Q: What’s the best way to find a new tenant fast? Kelly, Milwaukee, Wisconsin A: In my local market, I’ve found that a for rent sign (1) in the window of the house or apartment has worked best— Some other advertizing options: posting rental signs or banners(2), asking existing tenants for referrals (especially if they’re good tenants) (3), holding an open house(4), posting fliers at local businesses(5), place an ad in the local newspaper(6), craigslist(7), realtor(8), property mgmt company(9), add in a local penny saver (10). The effectiveness of each approach will vary, but in general, the more you advertize and the more ways you advertize, the better and the faster you’ll find a good tenant. Thanks for your question, […]

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Ask Gerald: 5 Ways to Finance a Real Estate Purchase

Q: I’ve been waiting for weeks to for my mortgage approval, if I’m denied, where else can I get the money to buy? Ken, Dover, New Hampshire A: Hi Ken, What I’m going to do for you is give you 5 different ways to finance a real estate purchase. The first is probably the most obvious choice, a bank, mortgage brokers, credit unions, hard money lenders (much higher interest rates & points—they are useful when you borrow for short periods of time particularly when you buy a property that needs substantial renovation) private investors, don’t assume that you’ll get lower rates, but it never hurts to check. Thanks for your question, ________, for more real estate tips, visit performanceproperty.com and […]

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Ask Gerald: How Do I Protect Myself from Shady Contractors?

Q: Hi Gerald, I need to find a good contractor to do some property renovations. The last time I hired a contractor, he took forever to do the work and never finished even though we paid him in full. I’d do the work myself, but with our new baby and the increased hours I have to work on my new job, I just don’t have the time. How do I protect myself from getting ripped off by a contractor? Steve, Hartford, Connecticut. A: Hi Steve, first of all, don’t beat yourself up about what happened with the last contractor you hired—it’s water under the bridge and is something you can learn from. We all make mistakes and unfortunately even the […]

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Ask Gerald: How can we evaluate a condo’s resale and rental potential before we buy?

Q: Hi Gerald, I read somewhere that a condo is a stepping stone to a single family home. My boyfriend and I are thinking about buying a condo until we get married and start a family. How can we evaluate a condo’s resale and rental potential before we buy? Sandra, Philadelphia, PA A: Hi Sandra, All economic activity is driven by demand, so your ability to resell a condo or any property is based primarily on how attractive that property is or will be to eligible buyers in the future. Unfortunately, nobody can predict real estate market movements. The best we can do is make the most informed buying decision possible based on concrete, verifiable information available to us today. […]

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Ask Gerald: Do I Really Need a Home Inspection?

Q: Hi Gerald, I’m buying my first house, I’m pretty handy, do I really need to get a home inspection? Zach, Minneapolis, MN A: Yes, although it does cost extra money that I’m sure you don’t want to spend, it makes sense to pay for a professional home inspector to inspect a property before you buy it. I’ve been a real estate investor for almost 15 years and even I can benefit from a 2nd set of eyes. I get home inspections on every property I buy. The home inspector should prepare a detailed report for you. To choose the best home inspection company in your area you may want to ask for referrals from people you know and trust […]

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Ask Gerald: How Do I Remove Pet Odor From a House?

Q: The tenant that just moved out of our rental property had lots of animals, how do you remove pet odor from a house? Renee’, Albuquerque, NM A: Renee’, here are 3 ways to remove pet odor from a house 1 Baking soda. A natural odor absorber and a natural air freshener 2 Use a HEPA filter and change the furnace and A/C filters frequently. Airborne pet odor can get trapped in your air filters and recirculate the stench on a continuous basis. 3 Paint the house. This may sound drastic but when all else fails painting the interior of your home may be just what you needed. It’s probably a good idea to paint before you show your property […]

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Ask Gerald: How Do I Earn Passive Income Using Real Estate?

Q: My wife and I are having another baby and I really need more income. How can I generate more income using real estate? Curt, Billings, Montana A: Thanks for your question, Curt. I’m going to give you 3 ways to earn passive income using real estate? 1) Rental properties 2) Private loans 3) REITS-mention URF; REIT is a company that owns, and in most cases, operates income-producing real estate. REITs are normally required to distribute the majority of their profits every year so they are a good source of passive income. Thanks for your question, Curt. For more real estate tips and for information on my real estate coaching program, visit performanceproperty.com. I’m Gerald Lucas and I’ll see you […]

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Ask Gerald: What Does Flood Insurance Cover?

Q: I’m buying a house and I think it’s in a flood zone. I want to make sure that my family and I are protected. What does flood insurance cover? (3 important facts about flood insurance) Henry, Boulder, CO A: That’s a great real estate question, Henry and one that’s very important particularly given the more extreme weather we are experiencing as a result of global warming. I actually worked briefly as an actuary for an insurance company many years ago not long after Hurricane Andrew. So to answer your question, flood insurance covers direct physical loss caused by flood. What I’m going to do is I’m going to give you 3 important facts about flood insurance that you may […]

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Ask Gerald: How Much Should I Budget for Property Maintenance Costs?

Q: I’ve been looking at rental properties to buy, I’m trying to budget my expenses and want to know how much it really cost to maintain a rental property? Carol, Tempe, Arizona A: That’s a great question, Carol. There are lots of factors that affect property maintenance costs. The condition of the property will influence the maintenance costs the property generates—so, newly built or newly renovated properties typically have lower maintenance costs than properties that haven’t been updated or renovated for a while. But I understand, before you actually own a property, it’s hard to know what assumptions to use to try to anticipate maintenance costs. I’ve owned many properties over my career as a RE investor and there are […]

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Ask Gerald: Property Management-5 Essential Contract Clauses

Property Management-5 Essential Contract Clauses Q: I don’t have the time to manage our property myself anymore so I’m thinking about hiring a company to do it. How should I protect myself? (5 clauses every property mgmt agreement must have) Jill, Little Rock, Arkansas A: That’s a great question, Jill. The first thing you’ll need to protect yourself is a written agreement or contract between you and the company or individual that will manage your property. Here are 5 items every property management agreement must have 1. parties to the contract, 2. beginning date of service 3. roles & responsibilities, 4. payment terms and 5. termination clause Thanks for your question, Jill. For more real estate tips and for information […]

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Ask Gerald!

Q: Hi Gerald, I found a great deal on a property that I want to buy. I’m satisfied that I did adequate due diligence: I checked sold price comparables and the property is fully rented in an area where I know I can find other tenants.  The problem is that my attorney is trying to convince me not to buy it.  What do you think I should do? Kevin, Salt Lake City, Utah Gerald: Hi Kevin, attorneys do not exist to give financial advice although they often do.  An attorney’s job is to interpret the law.  Unfortunately, attorneys thrive on power—this power is maximized by creating fear in their clients.  The more frightened they make their client, the more their […]

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Ask Gerald!

Q: Hi Gerald, I need to find a good contractor to do some property renovations.  The last time I hired a contractor, he took forever to do the work and never finished even though we paid him in full.  I’d do the work myself, but with our new baby and the increased hours I have to work on my new job, I just don’t have the time.  What should I do?Steve, Hartford, Connecticut. Gerald: Hi Steve, first of all, don’t beat yourself up about what happened with the last contractor you hired—it’s water under the bridge and is something you can learn from.  We all make mistakes and unfortunately even the most seasoned real estate investors have had bad experiences […]

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Ask Gerald!

Q: Hi Gerald, my tenant is not happy about getting a rent increase although the lease she signed states that the Landlord is entitled to raise the rent.  Of course we would like to keep a good relationship!  How should I reply to this?   Thanks in advance! Julie G: Excellent question Julie.  You are correct to be concerned about maintaining a good relationship with your tenant.  Firstly, you should openly acknowledge that you understand and appreciate how your tenant feels about the rent increase.  I normally tell tenants in many communications that although I am a landlord, I know what it feels like to be a tenant because I have been a tenant in the past and I understand […]

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Ask Gerald!

Q: Hi Gerald, I read somewhere that a condo is a stepping stone to a single family home.  My boyfriend and I are thinking about buying a condo until we get married and start a family.  How can we evaluate a condo’s resale and rental potential before we buy? Sandra, Philadelphia, PA Gerald: Hi Sandra, All economic activity is driven by demand, so your ability to resell a condo or any property is based primarily on how attractive that property is or will be to eligible buyers in the future.  Unfortunately, nobody can predict real estate market movements.  The best we can do is make the most informed buying decision possible based on concrete, verifiable information available to us today.  […]

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