Month: July 2017

Value: Assessed, Market, ‘Zillow’, Taxable

July 25, 2017

That’s an ‘uuugly house’. It was my 2nd investment & I was a 20 y.o. junior in college. It was also the highest ROI realty investment I ever had!

Market Value = house specific, current, based mainly on aesthetic appeal (new kitchen, Anibal-Affiliates-Realty_NetWorth_3134birchrow-eastlansing-mi-1982-bwonderful yard, location, etc.)

Assessed Value = neighborhood average, historical (old), based mainly on exterior mechanics (size/ age).

Now that we have that established, lets proceed.

Whether helping a seller set a price or helping a buyer write an offer, they want to know my opinion. “So how much it the place ‘worth’?”

  • A seller always picks a number that is highest – e.g.: ‘Well such n such says my house is worth $bla bla bla’.
  • A buyer always picks the lowest number (surprise) – e.g. ‘Well this says its only worth $yada yada.’

Opinion? Not so much, I prefer to provide information. With me & numbers I’ll give you various methods I use & crunch the numbers on YourSpace – YOU choose the value. My accounting & finance degree and nurture of broker fathers background with an economics masters has dictated this style as my preferred approach.

Back to definitions:

  1. Assessed =
    • neighborhood average,
    • historical (old),
    • based mainly on exterior mechanics (size/ age).
    • The assessor used a complicated ‘multiple regression analysis’ to take all properties with in the ‘taxing unit’ and give approximate values to the ‘components’ of homes.
      • i.e.: bathroom #1 is worth $2000, bath #2 an extra $600, #3…$250, etc.
      • 1000 s/f = $XX per s/f, 1001-1500 is worth $X per s/f
      • New roof = $XX less $X for each year its been there
  2. Market =
    • house specific,
    • current,
    • based mainly on aesthetic appeal (new kitchen, wonderful yard, location, etc.)
    • This
  3. , ‘Zillow’ = a computer model spits out this often ‘train wreck’ of a combination of #1 &2.
    • I’ve seen an $165k Zillow value on a home listed at $80k. I’ve seen the opposite, which can confuse a buyer obviously. Just a block away, 405 Oak St had ‘Zestimates’ of $183k to $93k to ‘Unknown’ all in the same year. I listed and sold it $150k ?? Figure that one out.
    • After all, ‘Zillow’ never walked the neighborhood, smelled the basement, met the neighbors, or saw the standing water in the spring time.
  4. Taxable = as it says. Forget using this number as a value. Your only concern here is if its too high, then you need to protest it. Its a ‘multiple regression analysis’ value.
  5. Bigger Picture RealtyNetWorth Value ? = Have you every booked a flight online? IntegrationCapNotice it says ‘save money by being flexible with travel dates’, yes? If your timing, tax situation, stage of life, & non-financial intangibles aren’t being considered, you may well need a better qualified ‘resource(s)’.

So whats a wise person to do?

The model I use for buyers and sellers is a spreadsheet approach that uses input from both the assessment – which considers the interaction of house basics, and current market sell prices from ‘as close as possible like-kind’ homes. To use one aspect without the other is a huge absence of a critical treasure of data.

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When to hold a rental, when to flip a house.

July 20, 2017

You invest in property. You’re approaching it as either a residence, retreat, rehab, or rental. But which came first, the property or the label? And more importantly, why did you choose one over another?real estate agent broker screening referral advocacy paul anibal team alloverusa__michigan_to_florida_california-to-maine

With such a substantial investment, I hope you have an idea of how you are evaluating on the way in based on your plan for use/ resale/ or rental afterward. So many clients start out with the “well this happened along our path one day so we just…” approach. Maybe o.k. for a garage sale find. But this randomized thinking potentially leaves dollars on the table and years of your life wasted.

Example:

  1. Customer wanted to sell a unit. “Why did you buy it?” I asked. “Well, it was a great deal so we bought it. then we rented it out”. ( A great deal for what ?)
  2. Customer wanted to have a unit inspected. “Why are you interested in this house?” I asked. “Well, I heard rental property is a good idea.” I asked, “Why?” …. he said “I don’t know.”
  3. Customer had a rental. “Why did you buy it?” I asked. “My friend called me and asked if I wanted to buy it.” So I asked, “do you have other rentals and why do you want this one”. He said, “no, first one, we want others”.

None of these folks had a strategy. They stumbled into their situation. In each case, I sat with them, started ‘at the top’, looked for customer strengths/ weaknesses/ and ideal goals.

  1. For customer #1, I said “so you want rentals?” Actually, it had never been profitable as a rental. They sold it for a profit, but the title choice drove up their tax burden. Further, had they made some specific improvements, the profit would have been better. They sold to a hustler by owner, but fortunately we took a better strategy going forward.
  2. For the 2nd scenario client, I tried to not completely make fun of the poor choice of home he wanted to – and almost did had he not called me – buy. Instead, I showed him only 1 more property. We spent an extra 60 minutes of his time, got a house in a better location, less money, newer, better heat/electric + 2 car garage, 2 decks and shed. That property more than doubled in value in a matter of months, and has had only 1 tenant in the 4 yrs. he’s owned it, bringing a good profit from rent and appreciation. The other property – still a mess and not worth much at all.
  3. In situation #3, we sat down and looked at how there is no profit from holding. Further, because of his skills, he’s better suited to rehab than to hold a loosing investment. All profit available on his held house will come from moving it, not holding it. Timing the sale will be the extra expertise I offer.

So the basic questions will still be, what do you have:

  • More or less skills.
  • More or less time.
  • More or less funds.
  • More need for current income (you are in a lower tax bracket), or more need for future (retirement) income, (you are probably in a higher tax bracket).

Based on these answers, there are very specific properties, areas, price ranges, and portfolio management styles (e.g.: you/ us) you’d be better suited for.  Decision time

I meet w/ clients a minimum of 1x/ year. This is a great time for a no-cost initial meeting to chat about what your real estate ideas are. Contact me via the feedback form to set a time & day !

In the meantime, I’m inserting text from an earlier post of mine:

In the early 80’s I picked up a very honest yet motivational ‘how to’ book on real estate investment. In my senior year of college I was set to invest. I actually drove to NJ, looked up as many of these homes as I could, took pictures, and tried to take notes in my then ignorance. After reading the book I bought a shack for $17500, w/ $1000 down, gutted the kitchen and bath, and placed into service what was one of my most successful investments to date.

I’ve used these & other techniques I gleaned from my broker/investor dad, and have shared them with clients for 3 decades.

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It comes down to humble work, patience, time value of money, and good mentors – I had my dad ! I keep a few copies of the book for clients I work with. Let me know if you’d like one.

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