Investing: College-Town Real Estate's Smartest Bets

Market Analysis:


Recent data shows that the demand for off-campus rental housing is rising, creating a large spike in rental prices that show no sign of slowing down. On the other hand, home values are still below their peak levels and mortgage rates remain low— making for great bargains for buyers who plan to own their home for at least three years. http://t.co/o9TOFHtDxL

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How to figure tax on sale of rental property

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Blanket Mortgages

A blanket mortgage is a mortgage which covers two or more properties. The real estate is held as collateral on the mortgage, but each property may be sold individually without affecting the entire mortgage.

This is an alternative to a developer having to take out multiple mortgages for a multi-property purchase where they intend to sell properties separately. Blanket mortgages are typically taken out to cover the costs of purchasing and developing land that developers plan to subdivide into individual lots.

Deferred Interest Mortgages

A deferred interest mortgage is a mortgage loan that allows the borrower to make minimum payments that are less than the entire amount of interest owed.

The remaining interest is added to the amount of loan to be paid off. This is considered to be negative amortization. The homeowner will let interest accrue.

By making minimum payments that do not cover the loan principal, the balance on the loan is unlikely to get smaller since the interest is calculated on the outstanding principal.

Because low minimum payments do give the borrower payment flexibility, this type of mortgage is often used by investor borrowers as a temporary financing solution.

Wrap-Around Loans

A Wrap-Around Loan also known as a "Wrap" is a loan that is most commonly used with property with an outstanding loan. The seller lends the buyer the difference between the existing loan and the purchase price. The buyer's loan payments should be sufficient to repay both the existing loan as well as the seller's loan to the buyer.

Wrap-around loans are a form of owner financing. Some wrap-around loans require consent from the existing lender, especially on properties that include a "due on sale" clause in the loan documentation.

Wrap-around loans can also be structured such that the buyer's payments are directed to the lender, rather than the seller, and the lender then forwards the buyer's payment to the seller.

The owner (lender) should be able to charge a higher interest rate to the buyer that what is currently being paid on the loan. Buyers often seek wrap-around loans when they cannot obtain conventional financing or mortgages.

The Best U.S. Markets for Rental Properties

The rental market has been booming over the past several years, with many landlords earning returns of 10% or better.

While rising home prices have limited returns for landlords in some markets, other markets offer plenty of profits, according to RealtyTrac which analyzed rental market conditions in 370 major U.S. counties, including median home prices, average rents and unemployment rates.

For example, landlords in Anderson County, S.C., can rent a three-bedroom home with a median price of $70,000 for $900 a month. With average returns of 15.3% -- that's well above the national average of 10%.

Home to a university and several auto parts makers for BMW, Anderson is part of the Greeneville metro area and has a low 4.3% unemployment rate, meaning demand should continue to strengthen and help add to future profits.

Other areas that offer landlords more bang for their buck include Woodbury County, Iowa. Median home prices in the area, which includes the Sioux City metro area, were a low $84,250 while rents averaged $914 a month. That translates into a rental return of about 13% for landlords.

While low unemployment is one factor landlords should look for while assessing a market, RealtyTrac also suggested that investors take the demographics of an area into account as well, particularly when it comes to baby boomers and millennials.

Markets where these populations are growing rapidly should produce strong returns for investors going forward. For boomers, who were born between 1945 and 1964, retirement-friendly markets in Florida are predictably hot. Some local markets have seen their boomer populations grow by 20% or more since 2007.

The Tampa-St. Petersburg-Clearwater, Fla. metro area topped the list among markets for boomers.

Millennial markets, on the other hand, were scattered throughout the nation. RealtyTrac cited the Baltimore, Philadelphia, Jacksonville, Fla. and Atlanta metro areas as leading rental markets for this age group.
Several smaller markets are also good Millennial bets such as Fayetteville, N.C. and Virginia Beach/Newport News City, Va.

Cash Out Refinancing Investment Strategy

Unlike capital gains created through selling (where an investor purchases a property, improves it for resale at a higher price, and then purchases additional properties with gains from the sale), Cash Out Refinancing is based on keeping all properties acquired. By not selling, the investor is constantly increasing the refinancing base while avoiding capital gains taxes.

Cash Out Refinancing begins with the purchase of one property. If more than one property can be purchased to start the plan, then the refinancing base will be enhanced at the outset. The type of property to be purchased should be improved income property that has the ability to generate enough cash flow to cover all costs and mortgage payments.

It is in the best interests of the investor to purchase better properties in stable or growing areas. Avoid older properties in declining neighborhoods where rents and values of such buildings are unstable and may decrease and thus ruin the refinancing cycle.

Advantages of Cash Out Refinancing
With the appropriate deductions and allowances, most, if not all, of the net income earned during the years of ownership could be sheltered, while capital gain, taxes could be avoided through the refinancing process. The estate could then be left for the investor's heirs, at the stepped-up values determined at the date of death, without the investor ever having to pay capital gains tax on any profits derived from ownership of the property.

Although Cash Out Refinancing to avoid capital gains taxes is a practical strategy, sometimes the sale of a property is unavoidable. As indicated, any gains made in such a sale: are subject to income tax.

Understanding Short Sales

Short sales are purchases negotiated with the owner and lender(s) before foreclosure. Typically the purchase price negotiated is less than the balance owed on the property.  For investors, short sales present an opportunity to buy real estate below market value and help borrowers avoid foreclosure.

Short Sale Process

• Both parties consent to the short sale process, which allows them to avoid foreclosure, which involves more fees for the bank and foreclosure being reported on the borrowers credit report. However, this agreement does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.
• The bank or mortgage lender agrees to discount the loan balance because of an economic or financial hardship on the part of the borrower.
• The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.

Short Sale vs Foreclosure

• Neither side is "doing the other a favor;" a short sale is simply the most economical solution to a problem.
• Banks will incur a smaller financial loss than would result from foreclosure or continued non-payment.
• Borrowers are able to limit damage to their credit history, and partially control the debt.
• A short sale is typically faster and less expensive than a foreclosure.
• It does not extinguish the remaining deficiency balance unless settlement is clearly indicated on the acceptance of offer.

For more information about short sales visit Carlisle Mitchell - Real Estate Tips for Investors

Your Objective Should Determine Your Strategy

"Of course, objectives are not the railroad timetable. They could be compared to the compass bearing by which a ship navigates. The compass bearing itself is firm, pointing in a straight line towards the desired port. But in actual navigation the ship will veer off its course for many miles to avoid a storm. She will slow down to a walk in a fog and heave altogether in a hurricane. She may even change destination in mid-ocean and set a new compass bearing toward a new port. Perhaps because war is broken out, perhaps only because her cargo has been sold in mid passage. Still, four fifths of all voyages end in the intended port at the originally scheduled time. Without a compass bearing, the ship would neither be able to find the port nor be able to estimate the time it will take to get there." ~Peter F. Drucker

All investors invest for some reason, with some objective in mind. Although objectives may change, they always exist.

As an investor it is important to stay focused, especially during times of market volatility. For best results your objective should determine your strategy.

For more information on investment objectives visit us online at Carlisle Mitchell - Real Estate Tips for Investors.

The Paydown Investment Objective

Paydown is when a mortgage borrower pays the principal and interest of a mortgage. In doing so, the borrower is paying down his or her debt.

Paydown also refers to an investment objective when a mortgage borrower pays the principal and interest of a mortgage from income received from a tenant. This is considered another source of income because it is money the borrower would otherwise have to pay.

Paying down the principal and interest increases the borrowers equity and can increase capital gains and income if sold or refinanced.

Investors who combine the paydown investment objective with other objectives and strategies can exponentially increase the return on their investment.

For more information about real estate investing visit us online at Carlisle Mitchell - Real Estate Tips for Investors

Refinance Now Before Rates Rise

(HOUSTON) – There has never been a better time to refinance your home. That’s because of a little-known government program called the Home Affordable Refinance Plan (HARP).

The Home Affordable Refinance Plan allows Americans to refinance their homes at shockingly low rates, and reduce their payments by an average of $3,000 a year.

But here’s the catch – like most government programs, this is likely temporary. Currently the program is set to expire on December 31, 2015. But the good news is, once you’re in, you’re in. If the thought of a lower payment or fewer years on your mortgage sounds appealing, refinance now before rates rise.

The 14 Best Places in the U.S. to Flip Properties

The 14 Best Places in the U.S. to Flip Properties
The best places for flipping properties are currently concentrated along the East Coast, but it's a popular practice across the country.

If you're interested in buying low and selling for significantly more than you paid, RealtyTrac came up with a list of locations with the best opportunities:

14. Middlesex County, N.J.

Average purchase price of flips: $200,015

Average sale price of flips: $264,742

Average ROI: 32.36%

13. Nassau County, N.Y.

Average purchase price of flips: $316,060

Average sale price of flips: $422,858

Average ROI: 33.79%

12. Monroe County, Fla.

Average purchase price of flips: $311,701

Average sale price of flips: $429,564

Average ROI: 37.81%

11. Berks County, Pa.

Average purchase price of flips: $117,846

Average sale price of flips: $162,774

Average ROI: 38.12%

10. Montgomery County, Md.

Average purchase price of flips: $347,682

Average sale price of flips: $482,969

Average ROI: 38.91%

9. Bergen County, N.J.

Average purchase price of flips: $320,010

Average sale price of flips: $450,492

Average ROI: 40.77%

8. Wright County, Minn.

Average purchase price of flips: $105,058

Average sale price of flips: $152,563

Average ROI: 45.22%

7. Anne Arundel County, Md.

Average purchase price of flips: $197,355

Average sale price of flips: $291,243

Average ROI: 47.57%

6. Saint Marys County, Md.

Average purchase price of flips: $180,411

Average sale price of flips: $268,254

Average ROI: 48.69%

5. New Castle County, Del.

Average purchase price of flips: $127,795

Average sale price of flips: $195,246

Average ROI: 52.78%

4. Campbell County, Ky.

Average purchase price of flips: $75,253

Average sale price of flips: $127,848

Average ROI: 69.89%

3. Baltimore County, Md.

Average purchase price of flips: $131,186

Average sale price of flips: $224,089

Average ROI: 70.82%

2. York County, Pa.

Average purchase price of flips: $88,063

Average sale price of flips: $151,871

Average ROI: 72.46%

1. Prince George's County, Md.

Average purchase price of flips: $125,011

Average sale price of flips: $229,275

Average ROI: 83.4%

U.S. Foreclosures Hit 8 Year Low

Foreclosure activity across the United States dropped to an eight-year low in May as banks reclaimed fewer homes and foreclosure starts saw their lowest levels in years, RealtyTrac said in a report on Tuesday.

RealtyTrac, which tracks and maintains housing market data, said 109,824 properties across the country were at some stage of the foreclosure process in May. That marked a 5 percent decline from April and left foreclosure activity -- foreclosure notices, scheduled auctions and bank repossessions -- 26 percent below the year-ago level.

Carlisle Mitchell - Investment Strategies - Real Estate Operating Companies

Carlisle Mitchell - Investment Strategies - Real Estate Operating Companies

A real estate operating company is a company that invests in real estate and whose shares trade on a public exchange. A real estate operating company (REOC) is similar to a real estate investment trust (REIT), except that an REOC reinvests its earnings into the business, rather than distributing them to shareholders. Also, REOCs are more flexible than REITs in terms of the type of investments made.


Because real estate operating companies reinvest earnings rather than distribute dividends to shareholders, they don't receive the same benefits of lower corporate taxation that are a common characteristic of REITs.

Investors in an REOC seek capital gains rather than passive income. When analyzing a potential REOC investment, an investor should look for relatively high return on investment capital, return on equity and return on assets, as well as a respectable valuation. These are all measures of how well a company has been using its invested capital, equity and assets to generate profits.

For more information on real estate operating companies visit us online at carlisle-mitchell.com

Carlisle Mitchell - Houston - Judicial Foreclosures

Carlisle Mitchell - Houston - Judicial Foreclosures.
Judicial Foreclosure is a foreclosure proceedings in which a mortgage lacks the power of sale clause. In such an instance, many states require the foreclosure to be processed through the state's courts. If the court confirms that the debt is in default, an auction is held for the sale of the property in order to acquire funds to repay the lender.

This differs from non-judicial foreclosures, which are processed without court intervention.
Many states require judicial foreclosure to protect equity the debtor may have in the property. Judicial foreclosure also serves to prevent "strategic disclosures" by unscrupulous lenders.

In instances where the sale of the property through the auction does not generate enough funds to repay the mortgage lender, the former homeowner will still be held liable for the remaining balance.

Income Property

Income property is property bought or developed to earn income using various investment strategies. 

Income property can be residential or commercial. Residential income property is commonly referred to as "non-owner occupied". A mortgage for a "non-owner occupied" property may carry a higher interest rate than an "owner occupied" mortgage as it is viewed by lenders as a higher risk.

A common practice during periods of home price appreciation is for investors to purchase residential income properties with the intent that rents will cover their monthly expenses for a period of time until the property can be sold for a large capital gain. 

As with all markets during times of fast price appreciation, and as with all market bubbles, investors that enter the market first and get out first usually do well. Investors that enter the market later, and get out last usually don't do as well.

Multi-Family Investment Property

Multi-Family Investment Property is a type of home or building with multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences; but with a duplex, both the property and the land are recorded on one deed. Whereas with a condo, the owners only own their individual units, not the common space or land, and each have their own deed.

Multi unit residential apartment buildings include multi family investment property of five or more residential units. This type of property can also be owner occupied (although not as common) or all units can be occupied by tenants.

Strategies for investing in multi family investment properties include buying properties at prices below market value and then leasing to tenants.

The investor can rent, refinance or sell for rental income, appreciation, capital gains and tax deductions, depending on the investors goals and objectives.

Short Sales

Short Sales
A home that is listed for sale at a price lower than the amount owed on the mortgage. Homeowners hope to sell their home as a short sale to avoid penalties associated with going into foreclosure. What can make it difficult to buy a short sale is that there are often two mortgages on the home and both lenders must approve the sale. The ownership of the mortgages on a short sale home usually belong to more than one party, so you'll likely have to convince multiple banks and lenders to take a loss on their original loan. This is why it often takes so long to approve a short sale offer. If the short sale fails and the homeowner can't afford to pay his mortgage, then the bank forecloses on the home.

Houston's City Centre Is a Hit

HOUSTON - City Centre mixed used commercial development has quickly become a main attraction in Houston, Texas.