Nov 012007

Well, the big news yesterday was the FOMC’s decision to lower the target rate for the Fed funds rate 25 basis points from 4.75% to 4.5%. Many homeowners, or potential homeowners, looking to either refinance or get into a new mortgage might think that this is good news for them as it surely means mortgage rates will also drop. Oddly enough, however, this is not really the case.

The Fed funds rate is the Fed’s tool to try to exert some control on the economy. That is, to either rev it up a bit when things are slowing down or to perhaps reign in inflation when things are getting too hot. Recently, we’ve seen the US economy beginning to slow down, largely due to problems in the housing sector and the credit markets. The Fed fears that if the economy cools off too much we’ll head into a recession. Technically, a recession would be a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters, although that definition is not universally accepted. Regardless, the Fed tries to stimulate things a bit when there is a slowdown by lowering the fund rate to encourage borrowing and get things going.

The Fed fund rate is only indirectly tied to mortgage rates. Speaking broadly and over time, when the fund rate falls 30 year mortgage rates tend to go down as well and vice versa, but not always. The fund rate is more directly tied to adjustable rate mortgages, car loans, credit card interest rates and similar credit areas. Longer term mortgage rates might actually move in the opposite direction than the fund rate, counter intuitive though that be. The reason being that the 30-year fixed mortgage rate is more or less determined by the price of the 10-year Treasury note. That is, the yields on the 10 (and even 30) year Treasury notes are used to set the longer term mortgage rates like the 30-year fixed.

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Oct 122007

Vacation property nestled in the heart of the Appalachian Mountains is not usually a topic we address here at PFJournal, but in fact mountain top land like this can be a great real estate investment. A nice opportunity like this is Heartwood Properties, a 330 acre mountain top development where you can get acquire some nice NC mountain real estate or even some Tennessee cabins if you prefer.

The land offers amazing mountain views above Watauga Lake on property that is bordered by National Forest land and is hiking distance from the Appalachian Trail. This is clearly the kind of property that would make a great investment with the wonderful benefit of offering a few years of vacation fun while the land appreciates. Personal finance is not just about pinching pennies and putting your money in a mutual fund. Sometimes it certainly makes more sense to enjoy your money a bit and putting it into real estate is almost always a sure bet.

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Oct 172005

Real estate foreclosure investing is a great way to pick-up an undervalued investment property. Researching real estate foreclosures can be tricky, but there are some good real estate foreclosure buying services out there that can help you. We are going to take a look at some of those services.

Here is information on two real estate foreclosure investment services that you can use to find information on real estate foreclosures: – Lists real estate foreclosures in all 50 states that you can search for free. Listing are from government HUD homes and bank foreclosures. They lists sales and foreclosure auctions. – Search a database of over 500,000 foreclosures for free. Lists foreclosure auctions, pre-foreclosure, banks foreclosure homes, FSBO and more.

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Aug 232005

You’re driving along the road when you spot it. There in the middle of a shaggy lawn sits a disheveled property. It may need a good coat of paint, or a shutter straightened out, but it’s easy to see that with a little work it could be a little gem of a property. Best of all, sprouting in the middle of the unkempt grass is a For Sale by Owner sign. It looks like the perfect fixer-upper, but how do you know for sure?

First, consider your reason for buying. If you’re looking for a property to ‘flip’ – to buy low, fix up and sell for a profit – there are a number of things you’ll want to take into consideration. If your intent is to buy it as rental property, there’s a different set of consideration, and if you’re looking for a home of your own, there’s yet a third. Let’s assume, for the sake of this article, that your intent is to flip the property for profit.

Test 1: The Neighborhood Test

Before you invest another hour, do yourself a favor and take stock of the surroundings. The old saying in the real estate business that the three factors in selling a home are ‘location, location and location’. What is the location like? No matter how wonderful the property is, you’ll have a difficult time selling it for top price in a bad neighborhood. That doesn’t mean that it’s a bad property – depending on how low a price you can bargain, you still may be able to make a decent profit from it.

Another consideration in the Neighborhood Test is a bit more subjective, and you’ll have a feel for it if you’re local and keep an ear to the ground. Is the neighborhood in transition? A neighborhood that is on the cusp of a renewal effort like gentrification can be a great place to invest, as long as the upward momentum continues. An area that is on the outskirts of new development will often benefit from that as well. If, on the other hand, the neighborhood shows signs of slipping into a decline, you might want to pass the property by. If you can see that the neighborhood is slipping, so will prospective buyers.

Are there ‘amenities’ nearby? Depending on the neighborhood and your prospective market, those amenities might include a neighborhood school with a good reputation, a corner store within walking distance, or a park right down the street. In one Massachusetts city, for example, the value of properties in a formerly depressed neighborhood skyrocketed when a local university announced a commitment to provide full tuition to the children of neighborhood residents, and provided additional incentives to home buyers within several blocks of their campus. Investors who bought just before the announcement realized excellent turnaround on their investment.

Test 2: The Pricing Test

Is the home listed with a Realtor, or is it a FSBO? How realistic is the asking price? Is it in your price range? Can you work out a low or no-money-down financing option? How open to negotiation is the seller? Will you be able to realize a profit after making needed repairs?

Test 3: The Condition Test

This is one of the most important tests. The property you want to buy doesn’t require any extensive, expensive repairs. It should be structurally sound, without any major plumbing or electrical problems. If you’re just starting out, you’ll want a property with repairs you can manage yourself – repainting, refinishing floors, a little landscaping. If the property requires more extensive repairs, it will cut into your profit, or eliminate it altogether.

When you view the property, really kick the tires. Look for indicators of hidden problems. Here are a few things to look for:

* Moisture stains on walls and ceilings could indicate plumbing problems

* Little piles of sawdust near corners or woodwork could mean termites.

* Separations between floor and wall, especially outer walls which could indicate structural problems.

* Lift tiles in suspended ceilings to examine the ceilings above for loose plaster, moisture stains and other indications of problems.

Test 4: The Title Test

The final test is the title test. Be certain that the title to the property is clear, with no liens or attachments that could sour the sale. If there are, and you still want the property, work out a conditional sale, where your purchase is contingent upon the liens being satisfied.

If the property passes all of the above tests with flying colors, congratulate yourself. You’ve got yourself an investment property that could turn a pretty profit for you.

Article by Andrew Lo of

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Aug 232005

Real estate appraisal for rental properties isn’t the same as for single family homes. If you were looking at a 24-unit building, it would be difficult to find similar ones nearby that have recently sold. Therefore, a market analysis using comparable sales isn’t normally used. Continue reading »

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Feb 052005

So you are interesting in becoming a landlord? Investing in rental properties can be an exciting and very profitable business. Not only can real estate provide current income through rental property but it also can increase your personal wealth or networth. Make no mistake, this is not a sure thing to easy money and investing in real estate is not for everyone. There are risks as with any business or investment but with careful research and the help of a real estate professional you can find the right property in the right location for maximum return on your investment. Continue reading »

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Jan 282005

Gearing. The same factor that gives the buy-to-let landlord his massive advantage in a rising property market is one of his worst enemies in a falling market. With housing markets across the world teetering on the brink of a chasm, now may very well be a good time to evaluate exactly what gearing means to the average buy to let landlord. Continue reading »

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Jan 142005

Why real estate, or why property, some people ask when looking for an investment. Well, as far as I am concerned, real estate/property investment is, and always has been, the most powerful type of investment for building wealth. It has been said that over 90% of the world’s millionaires got there by owning property. The reason property is such a powerful way to build wealth is due to one key concept: leverage. Continue reading »

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