How To Protect Your Real Estate Investment

Protecting Your Real Estate Investment

How can you better protect your Real Estate Investment?  Here are a few steps I strongly suggest.

1. Homestead

When you record a Declaration of Homestead, Nevada law protects the equity in your home up to $550,000 from general creditor claims (unpaid medical bills, bankruptcy, charge card debts, business/personal loans, accidents) but would not preclude a seizure or forced sale of your residence from general creditors if your equity exceeds the $550,000.

The Homestead law does not protect you against debts secured by a mortgage or deed of trust, payment of taxes, IRS lien, mechanic's lien, child support or alimony payments.

2. Homeowners Insurance

Typical homeowner’s insurance policies offer coverage for damage caused by fires, lightning strikes, windstorms and hail. In addition they cover losses/damage due to theft and accidents that occur on your property. However, it's important to know that not all natural disasters are covered by homeowners insurance. For example, damage caused by earthquakes and floods are not typically covered by homeowners insurance. Verify your coverage with your insurance agent and we suggest doing this annually.

3. Home Warranty

A home warranty is a one-year, renewable service contract that covers repairs and replacements of most major home appliances and system components due to failure, standard usage and other problems that happen due to age.

What does it cover?  A home warranty will typically cover most major components of large home systems, such as your HVAC (central heating ventilation air condition), hot water heaters, plumbing, electrical and more. It may also cover regular appliances such as washers, dryers, refrigerators and stoves. Some plans allow you to purchase optional add-on coverage for your spa, second refrigerator, swimming pool, pumps and more. Always ask about roof coverage, as some warranties do not include this as a standard item.

4. Credit Protection / Life Insurance

Mortgage Payment Protection typically covers your loan payments if you lose your job or become disabled, and/or it pays off your mortgage when you die. These products are often times frowned upon and not as easy to obtain as they once were sold with the mortgage, but with a little research, you can usually find a reputable agent to explain the pros and cons.  I am a fan of insurance and have seen many homeowners stay in their homes when they were disabled due this type of coverage.

To Buy or Not to Buy (that is the question) 2018

If I had a dollar for everyone that asked me if this is a good time to buy, I could retire early or at least take a nice vacation.  All jokes aside, here are the facts. 

1. Prices across the board are still affordable
2. Interest rates are still low
3. Down payments are minimal
4. Inventory is dwindling

So YES, it’s TIME to BUY a piece of property.  Many experts are saying prices will continue to rise, rents will increase, and interest rates will certainly rise over the next 12 months.  Maybe they are right and maybe NOT, but WHO CARES.  Clearly, we all want a deal and bragging rights because we bought for the lowest price and sold for the highest profit.  However, prices are rising and now is the time to pull the trigger, worrying about someone down the street who pays a few dollars less than you doesn’t make much sense.  My dad always said, “study long, study wrong” don’t miss a great opportunity fishing at the bottom, because you might end up with a hand full of sand.

There are truly only two types of buyers, owners and investors.  An owner is buying to live in the property and occupy it as their primary residence or vacation home.  Investors on the other hand are buying with the sole intention of selling or renting. If you are buying with the intention of selling (flipping the property), you want to pick the property up for the absolute lowest price, so you can maximize your profits.  With prices rising those opportunities are not as plentiful, but still exist. Investors buying to hold (rent) properties are not quite as cost sensitive. Every economic indicator says that rents will dramatically increase over the next decade and renting will be in high demand. Investors that play in this field, simply look at the ROI return on investment. If they can cash flow monthly and have an asset that is appreciating they are happy.

So what about YOU, the end user. Why should you BUY?  Simply because you must live somewhere and pay someone.  Why not pay your own mortgage vs paying someone else’s. Currently you can still write off mortgage interest and with modest appreciation and this low interest rate environment you can still buy at a great price and payment. 

Don’t be that person fifteen years from now, talking about the great four-plex that you missed out on.  That perfect dirt lot, that a shopping mall ends up being built on, or just simply in a home that could have over six figures of equity all because you had a failure to launch.

BUY NOW!!!

Goal Setting for the New Year

Soooo… What are you going to do different this year, than you did last year?  If you’re like the majority of people, every year you make resolutions that you never resolve, right? Join me by yelling at the top of your lungs, NOT THIS YEAR!  This year will be different, this year; you will achieve your financial goals!  But the question is HOW?  First, write them down and second, revisit them daily, weekly and monthly.  We all know the age-old adage, “That which gets measured, gets done.” 

1. Define the Goal
2. Make it Realistic
3. Execute

DEFINE your actual GOAL?  And no, it can’t just be “I want to buy a house”.  Is your credit score up to par, do you have money saved, have you applied with a mortgage professional, and finally, how much house can you comfortably afford?  These are the questions you have to ask yourself.  Always ask yourself the TOUGH QUESTIONS.

Make it REALISTIC.  One of the biggest pitfalls of goal setting is planning goals that you’ll never be able to achieve.  The most common New Year’s resolutions from my clients and friends…  I’m going to lose weight and/or save more money.  The next questions are… how much weight and how much money?  If you’ve never saved any money, don’t expect to save half of your yearly income in one year. Start with small increments and work your way up.  A great rule of thumb is to try and save 10 percent of what you bring home after all taxes and deductions, also known as your net income.  To get started work on 5 percent.  Heck, start with $100 a month, whatever it takes, just get started!

Lastly, EXECUTE!  Quit putting off until tomorrow what you can start today. The first step is to cut your expenses.  Review all 12 months of your 2017 bank and credit card statements. Find out where your money actually goes. You may be surprised to see how much money is spent on ATM fees to access your money. Use the ATM at your bank.  A few suggestions: limit your eating out, unnecessary cable channels, limit monthly subscriptions and memberships that you rarely use.  Go to the library instead of buying books for leisure reading (how often do you actually re-read a book)?  Pack a lunch a few days a week, make coffee at home or work instead of daily Starbucks. Instead of nightly movies every weekend, try some matinees.  Lastly, buy in bulk for toiletries, dry goods and items you have to buy regularly. 

Now to start saving the extra money you just discovered, open an interest-bearing account specifically for your savings.  I recommend that you do not link the account to your daily account nor have an ATM card.  I would even go so far as to suggest a completely different financial institution. The reason for the separation is to curb your temptations.  How hard is it to lose weight if you have a refrigerator full of ice cream and cabinet full of cookies, pretty hard, huh?  So don’t temp yourself.  Good luck and Happy New YOU!

Alicia Taylor is a licensed Mortgage Banker and Real Estate broker with over twenty five years in the finance and lending industry.  If you are looking to purchase, refinance or sell your current property. Please all Mortgage Solutions, LLC 702-368-0059.