6 Reasons to Build or Buy in Up-and-Coming Areas

When searching for a new home, buyers often look for houses or land in the best neighborhoods — or, at least, the best neighborhoods that they can afford. And that’s certainly understandable. However, homeowners may be missing out on several advantages by not considering less prestigious or less desirable neighborhoods.

Below are six reasons to build or buy in up-and-coming areas.

Your money goes a lot further in up-and-coming areas.

Your money goes a lot further in up-and-coming areas. Image: TDK Visuals/Shutterstock

#1: Lower price points

It’s natural to want to be in an area in close proximity to popular dining, shopping and entertainment options. Even if you’re buying the home to flip it, you want to own property in a desirable area. “When you buy in the best part of town, you are paying top dollar for the property,” according to Oliver Somoza, Partner of Philadelphia-based S7 Real Estate and Turnkey Property Pro. But when you invest in a less popular neighborhood, your buying power can go much farther.

“Whereas $300,000 might get you a studio apartment in the city center, it could buy you not one but two 3-bedroom houses in a growing neighborhood not too much farther away,” he says.

You'll have more money left over for your renovation.

You’ll have more money left over for your renovation. Image: Andy Dean Photography/Shutterstock

#2: Personalization

When you build or buy a home in an up-and-coming area, you buy at a lower price point. That means you now have the funds to create your ideal place. And that’s especially important if you purchase a fixer-upper that needs major repairs.

“Now you can consider retrofits and renovations that will help you build the home that you want to be in, instead of adjusting your needs based on the space that already exists,” explains Mick Lynch, Senior Vice President of Installations at Power Home Remodeling. So you can install those hardwoods in the kitchen or use those brick walls as a design element. And there’s another bonus to being in an up-and-coming area. “You tend to have more freedom to make external renovations without worrying about zoning ordinances and other neighborhood restrictions,” he says.

Your home and neighborhood will increase in value.

Your home and neighborhood could increase in value. Image: Shelia Fitzgerald/Shutterstock

#3: Increased resale value

Since the neighborhood is up-and-coming, you can get in before prices start to skyrocket. And as a result of your renovations, you can significantly increase the home’s resale value. “However, just make sure you understand real estate trends in that neighborhood. [Understand] what’s happening in the market and in that specific county,” Lynch advises. He warns against relying solely on word-of-mouth, which can be misleading. “It’s important to do the research, study the people and companies migrating to those areas and let the information dictate what neighborhood is best for you.”

When a neighborhood starts to transition, Matt van Winkle, Founder and CEO of RE/MAX Northwest, says it often takes five to 10 years for it to really transform. But he agrees that buyers who get in early can see tremendous gains. “Value add or sweat equity homes in up-and-coming areas provide a lower entry point for buyers and the ability to be part of the transformation if they remodel a home,” he explains. You’re not only benefiting from the return on the remodel. van Winkle says you can also benefit from the appreciation of the neighborhood.

You might find a quirky, lively area.

You might find a quirky, lively area. Image: maLja/Shutterstock

#4: An existing sense of community

Lynch’s advice is actually based on his personal experience. “I recently bought a home in an up-and-coming neighborhood, and it was the best decision I could have made,” he says. As he was searching for the right area, Lynch looked for certain things. He wanted to find a neighborhood with an existing sense of community where he and his family could fit in and thrive. “For my family, our new neighborhood was such a great fit because we enjoyed the vibe of the neighbors, the potential job opportunities based on the companies moving into that area, and the ability to make the house and community we were moving into truly our home.”

Renting shouldn't be a problem after you fix up the home.

Renting shouldn’t be a problem after you fix up the home. Image: karamysh/Shutterstock

#5: Appeal to a larger pool of tenants and buyers

If you’re purchasing a property to flip and then rent or sell, there are several advantages to choosing one in up-and-coming areas. “For one, you have lower initial costs, but you also improve your chances of renting to good tenants or making a quick and profitable sale,” Somoza says.

“Everyone is looking to lower their costs of living, and many are being priced out of the popular areas in today’s rental market.  So they’re turning to — you guessed it — up-and-coming neighborhoods,” he explains And this means that you’re not likely to have any problems keeping your property rented. “You’ll also be able to increase rent as the neighborhood becomes more desirable. And you could potentially see buyers competing for an already upgraded property if you’re looking to sell,” Somoza says.

Gentrification isn't inevitable.

Gentrification isn’t inevitable. Image: Duncan Andison/Shutterstock

#6: Create higher-quality affordable housing

Investing in up-and-coming areas often leads to gentrification, but it doesn’t have to. “Actually, real estate investment in these areas can even combat gentrification by creating better affordable housing without displacing people and families,” Somoza explains. “If a developer purchases an outdated apartment complex with the intention of fixing it up and renting it out, there is an opportunity there to provide clean, updated, affordable housing to the people who already live in the area.”

Look for the signs of a promising area.

Look for the signs of a promising area. Image: Brian Goodman/Shutterstock

Finding the right up-and-coming areas

There’s no exact science to identifying a neighborhood poised for growth. That said, there are a few things to look for. “Increasingly, people are rejecting far-flung suburbs and are embracing walkable, urban neighborhoods,” says Gianpaolo Manzolillo, Licensed Real Estate Salesperson at Citi Habitats in Brooklyn.

“Look for areas that offer an easy commute to the downtown business district or that are located along transit lines,” he says. This is based on the theory that no one wants to spend hours sitting in traffic. “Districts that are adjacent to already-established desirable areas also offer a lot of potential for upside due to the ‘spill-over’ effect,” Manzolillo adds. When they can’t afford what they consider the prime neighborhood, people look to purchase in surrounding areas.

The post 6 Reasons to Build or Buy in Up-and-Coming Areas appeared first on Freshome.com.

When is a Lowball Offer a Good Idea?

Let’s face it: buying a home is like a game of chess, and each person is trying to outwit the other. You want to purchase the house for the least amount of money and the seller is trying to get as much as possible out of the deal. So when should you use a lowball offer as a part of your strategy?

Freshome asked several top realtors to weigh in on this topic.

holidays

Sometimes, it’s better to receive than to give. Image: jimfeng/Getty Images

The holidays

Apparently, sellers are in a more generous mood during the most wonderful time of the year, according to Shelton Wilder, a Beverly Hills, CA-based realtor at the Douglas Elliman Real Estate Company. In fact, she remembers one buyer who put in a lowball offer on Christmas Eve.

“The holidays and the fourth quarter are slower, but sellers tend to panic every year at this time,” Wilder says. “If a house has been sitting a while without offers, then it can create the perfect scenario for a buyer to pick up a property for a steal.” Also, she says that some sellers want to close the deal before the end of the year for tax purposes.

house won't sell

The longer a house sits, the better your lowball offer looks. Image: Haywire Media/Shutterstock

The home has been on the market for a while

If a home has been sitting too long, this can also be a good time to lowball an offer. A home will generally sell for asking price or over in the first seven days, according to Tom Matthews, part of the Tom and Joanne Team at Gibson Sotheby’s International Realty. “After 8 to 45 days on the market, a home is likely to sell for asking price.” But after this time frame, Matthews says a home will usually drop in price and this is an appropriate time for a lowball offer.

And Jenny Okhovat, a realtor with Compass in Los Angeles, CA, agrees. She says that a lowball offer is only a good idea when the home has been sitting on the market for quite some time, or if your realtor recommends it. “Your realtor should work with the opposing realtor — unless the home is FSBO — to come to a conclusion about whether or not the lowball offer will be considered by the seller,” she explains. “A lowball offer is only a good idea when there are no other offers on the table. Otherwise, it may be used against you to create a ‘multiple offer’ dynamic.”

repairs

A house that’s not in top shape won’t get top price. Image: ronstik/Shutterstock

The home needs repairs

If the home needs some work, the seller should be expected to lower the price accordingly. And the more work the home will need, the lower your offer can be. “If the property is in a state of significant disrepair and the seller doesn’t have the resources to fix the property or bring it up to market standard, the sellers are going to receive offers that are much lower than just the cost of fixing up the property,” explains Brett Jennings, Founder of the Real Estate Experts in the California Bay Area. “Buyers are going to factor in the price of their profit margin (if they’re an investor) or the time and hassle of renovating (if they’re a homeowner).”

homeowners tired

Homeowners soon tire of going through the selling process. Image: Jon Bilous/Shutterstock

There are failed attempts to sell

Sometimes a house is on the market for a while because a sale didn’t go through. “It can be helpful to look for properties that accepted an offer and went into contract, but then the transaction fell apart and they came back to market,” Jennings says. “These sellers are often more motivated to accept lower offers.” If there has already been one failed attempt at a sale, he says they may be more open to negotiating the second time around. In this case, a lowball offer could be a good option.

Crime scene homes aren't popular.

Crime scene homes aren’t popular. Image: Calkins/Shutterstock

The home has a bad history

It’s not only people who can have a bad reputation. Not many people will want to live in a home that’s gained notoriety for an unpleasant reason. “A home could be unmarketable if it was the site of a highly public murder,” says Phil Georgiades, Realtor, Mortgage Expert and Chairman of FedHome Loan Centers. Also, if there was a bad fire or the owner chose not to rebuild after a hurricane, some buyers could be apprehensive. This could help your lowball offer get accepted.

overestimate price

Homeowners may overestimate the value of their home. Image: Artazum/Shutterstock

The home is overpriced or it’s an extreme buyers’ market

If the property is desirable or priced fairly, Georgiades doesn’t think a lowball offer is usually a good idea. “However, if the property is overpriced, a lowball offer may make sense,” he says. And Georgiades adds that sometimes sellers tend to overprice their homes. “If your agent appraises the home you are looking at and it is overpriced, it may make sense to write a lowball offer for fair market value,” he explains.

“An extreme buyers’ market is actually pretty rare,” Georgiades says. “In the past 20 years, there has almost always been a housing shortage.” However, this may vary depending on your region of the country — or even by city or part of town. If you are trying to purchase a home in an extreme buyers’ market, a lowball offer will go over better.

foreclosure

Homeowners on the verge of foreclosure are likely to take your offer. Image: olikoff Photography/Getty Images

You know the seller’s motivation

If you can learn a little more about the seller, you may be able to determine the reason why the home is on the market. Then, you can decide if a lowball offer could be appropriate. “I cannot stress enough the importance of dialogue with the seller or seller’s agent to understand the seller’s needs and motivation,” advises Joanne Taranto of the Tom and Joanne Team at Gibson Sotheby’s International Realty.

“Do they need to move to a new state for a job or to care for an elderly relative? Did they inherit the property but don’t have any interest in holding onto it? If you can identify what is important to the seller, you may be able to negotiate a better deal,” she says.

Jennings agrees. “The prospect of accepting a lowball offer is one that happens either because the seller is under some sort of stress and has a pending event like a foreclosure,” he says. “Or they don’t have the time or resources to bring a property to market.”

Low ball offer

A lowball offer can be offensive. Image: Fancy/Veer/Corbis/Getty Images

The risks of a lowball offer

All that said, one of our realtors is against a lowball offer under any circumstances. “Talk about starting off on the wrong foot,” laments Vivian Cobb of Colorado Springs, CO-based Cobb Real Estate. “A lowball offer is usually contrary to the spirit of trying to get the deal done.”

Cobb explains that getting to the finish line of a real estate transaction is a team sport. “If the other team is starting out by being insulting, it doesn’t usually go well from there,” she warns. However, Cobb also says that this practice may vary by market. “In California, for example, lowballing is the norm. But in Colorado, it’s considered bad form.”

And while Okhovat believes there is a time for lowball offers, she also thinks buyers should be cautious. “You don’t want to lowball a property that you really want,” she says. “[A lowball offer] can only be for a property you’re willing to lose out on if your offer is not accepted. “

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Buyer Beware! 4 House Hunting Mistakes To Avoid If You Want To Find Your Dream Home

Looking for your dream home is tricky. Especially if you’ve never been through the home buying process before, it can be easy to make missteps or to get caught up in small details that really don’t make much difference. With that in mind, we’re here to help. We’ve pointed out four of the most common house hunting mistakes, as well as how to avoid them. Keep reading to make sure you stay on track.

house hunting mistakes

Don’t forget to get a pre-approval before shopping. Image: Photographee.eu/Shutterstock

Mistake: Not getting pre-approved before looking

Getting a pre-approval should be every buyer’s first step toward buying a home. This document, which comes in the form of a letter from the mortgage company, will tell you how much money you’ll be able to receive in a loan. It’s crucial in helping you set your own budget, as well as showing sellers that you’re serious about buying their home. You’ll include a copy of the letter with every offer you submit in order to prove you’re financially fit to purchase the property.

The Fix: Go see a lender before you even talk to a real estate agent. He or she can help you figure out how much of a loan you can be approved for as-is and, if needed, assist you in figuring out what steps to take to improve your financials and increase your loan amount. Once you have a satisfactory pre-approval in hand, then you can start shopping.

budget

Work out your own budget. Image: Pics721/Shutterstock

Mistake: Forgetting to set your own budget

While a pre-approval is a necessary tool to have, it should not be the only detail that factors into setting your house hunting budget. Remember, the pre-approval shows the maximum amount that you’ll be given in a loan. You don’t have to spend that much, though, and you probably shouldn’t. You need to make sure that you’ll be able to handle your mortgage payment on top of your other recurring monthly expenses.

The Fix: Make your own budget – and stick to it. You can start by using a mortgage calculator to estimate what your monthly payment could look like at a variety of loan amounts. Then, when you find a point where you feel comfortable, work that figure into your monthly budget to make sure it makes sense when combined with the rest of your expenses.

agent

Hire a good real estate agent whom you trust. Image: Photographee.eu/Shutterstock

Mistake: Not hiring an agent

Especially if you’re a first-time homebuyer, navigating the world of real estate can get tricky. Though hiring an agent is an extra expense, it’s a necessary one. An agent is there to be your advocate. He or she will help guide you through the process, steer you clear of house hunting mistakes, answer any questions that you may have and negotiate on your behalf. You don’t want to go through this process without someone in your corner.

The Fix: Make sure you hire a good real estate agent whom you trust. Do your research and check out several agents’ backgrounds before you commit to working with anyone in particular. Read online reviews to get a sense of how their other clients felt about working with them. Interview them in person to make sure you feel comfortable.

living room

Look beyond the aesthetics. Image: Photographee.eu/Shutterstock

Mistake: Fixating on aesthetics

We get it: when interior design is bad, it’s really bad. It can be hard to get past having a thousand shades of paint on the walls or a kitchen that looks like it was last remodeled in the 80s. However, if you let yourself get tripped up by those small details, you could be missing out on the ideal property for you. At the end of the day, aesthetics can be fixed.

The Fix: Do your best to put aesthetics aside when you look at a property. If you decide to buy it, you can always work on remodeling down the road. Instead, focus on features that can’t be as easily remedied and make sure you’re happy with those first. Here, we’re talking about things like the location and the number of bedrooms and bathrooms.

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These Are The 4 Foolproof Signs You’re Ready To Stop Renting And Become A Homeowner

At some point in our lives, most of us will stop renting and become a homeowner. The question is, how does one know when it’s a good time to take that leap? If you’ve been thinking about taking the plunge and buying a home recently, you’ve come to the right place. We’ve laid out four signs that you’re ready to stop renting and own a home. Read them over to help determine if now is the time for you.

stop renting

You need at least two years of steady employment to be able to buy a home. Image: Breadmaker/ Shutterstock

You’ve been at your job for a while

One of the keys to being able to buy a home is having steady employment. Essentially, since mortgage companies are giving you such a large loan, they use your employment history as an indicator that you’ll likely continue having the funds to pay them back. Traditionally, they look to see that you have at least two years at the same company before granting approval.

If you’re a freelancer or otherwise self-employed, don’t worry. There are ways to prove that you have a steady paycheck beyond showing a couple of years of W-2s. In your case, showing steady employment will be all about your tax returns. You want to have at least two years of high-net tax returns in place to prove that you have a steady source of income.

debt

Aim for a debt-to-income ratio of 36 percent. Image: Imagenet/Shutterstock

You’ve got a handle on your debt

Notice we didn’t say that you have to be debt-free. These days, between student loans, car payments and medical debt, most loan companies know that it is unrealistic to expect borrowers to be totally debt-free. Instead, they simply look to make sure you aren’t carrying too much debt relative to what you make. They want to know you’ll be able to afford to take on an additional mortgage payment.

They do this using something called a debt-to-income ratio. Your debt-to-income ratio looks at how much of your monthly income goes toward paying off debts. Ideally, in order to buy a home, your ratio should be less than or equal to 36 percent. To find your current ratio, simply add together your current monthly income. Then, divide that by the sum total of your recurring monthly debts, except rent.

If your debt-to-income ratio is too high to be approved at the moment, you have two options. You can either find ways to generate more income or to pay down your debts. If you’re serious about buying in the near future, you may want to talk to a local lender about which specific moves will have the biggest impact on your finances.

savings

Verify that you have enough money in your budget to save. Image: korisbo/Shutterstock

Your budget allows for some savings

In addition to a steady paycheck and manageable debt, the next piece that you need to have in place before you can stop renting and buy a home is some sort of savings. It shouldn’t come as a surprise that buying a home does come with some sizable upfront costs. While the days of having to put 20 percent down are, thankfully, a thing of the past, you do have to have a fair amount of cash-in-hand.

The first – and biggest – expense that you need to worry about is your down payment. These days, you can get a conventional loan for as little as 5 percent down, while loans backed by the Federal Housing Administration (FHA) typically only require 3.5 percent. Remember, the amount you have to pay will depend on the sale price of the house you buy, so be sure to factor your savings into your househunting budget.

In addition to the down payment, there are also closing costs to consider. Closing costs account for any fees necessary to facilitate the transaction. They usually amount to an additional 1-2 percent of the sale price and are split between the buyer and the seller at closing.

settled

Make sure you’re ready to settle down. Image: romakoma/Shutterstock

You’re ready to settle down

This last sign is a bit more subjective than the rest, but it’s just as important. Owning a home is a big lifestyle change and, before you take the leap, you need to make sure that you’re ready for all that comes with it.

One sign you’re ready to settle down is that you like your area and you intend to stay there for the foreseeable future. Conventional wisdom states that, if you buy, you should be prepared to stay in your home for at least the next five years in order to get the most out of your investment. If you can see yourself putting down roots for that long, you may be ready. However, if you think your life could change drastically in the next five years, it may make more sense to continue to rent.

Another sign that you’re open to the idea of staying put is that the idea of doing home maintenance no longer intimidates you. Unsurprisingly, owning a home means taking care of its continued upkeep. If you’re comfortable with the idea of making these tasks part of your ongoing routine, it’s a good sign you’re ready to stop renting.

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