If you purchased a home last year and occupied it as your primary residence by January 1, 2012, and you aren’t currently claiming homestead on a different property, you are eligible to lower your property taxes through filing for your homestead exemption in the country where the property is located. Here’s how it works: The taxing authorities (school district and county) allow you to remove part of the taxable value of your home for tax purposes since you are using the property as your residence. For example, if your property is valued at $100,000 and you qualify for a $20,000 exemption, you would pay taxes on just $80,000 therefore reducing your property taxes significantly. The deadline to file is between January 1 and April 30th, 2012 – You cannot file before or after and if you miss it, you would not have another chance to file until  this time next year.

New Law

In September of 2o11, House Bill 252 imposed new requirements on property owners that want to claim exemptions. Due to the spread of duplicate or multiple filings of homestead exemptions on several properties by the same owner, this bill now requires the homeowner to provide the following along with their application:

1. Copy of drivers license showing the address of the property and
2. Copy of car registration with the property address. In the absence of a vehicle, you can provide a utility bill with that address or complete a notarized affidavit

Harris County

If your property is located in Harris county, please print out the Harris County Application for Residential Homestead Exemption form , fill it out and mail back to Harris County Appraisal District, P. O. Box 922012, Houston, Texas 77292-2012 along with the supporting documentation from above. If you have any questions about how to complete the form, you can email me or call me on my cell at 713-922-2702.

From the Harris Country website these are the exemptions that may be available:

School taxes — all homeowners.
If you qualify for the homestead exemption, you will receive at least a $15,000 homestead exemption on the value of your home for school district taxes.

County taxes — all homeowners.

Harris County currently provides a 20% optional homestead exemption to all homeowners. This means, for example, that if your home is valued at $100,000, the exemption will reduce its taxable value for Harris County taxes by $20,000 to $80,000.

Optional exemptions — all homeowners.

Any taxing unit, including a school district, city, county or special district, may offer an exemption for up to 20% of your home’s value. The amount of an optional exemption can’t be less than $5,000, no matter what the percentage is. For example, if your home is valued at $20,000 and your city offers a 20% optional exemption, your exemption is $5,000, even though 20% of $20,000 is just $4,000.

Fort Bend County

If your property is located in Fort Bend County, you can download the application, and mail back to:

Fort Bend Central Appraisal District
2801 B.F. Terry Blvd.
Rosenberg, Texas 77471-5600

Here again you will need to provide supporting documentation (driver’s license and vehicle registration or utility bill).

Download Brazoria County , Montgomery county  and Galveston County applications.

The time has come for me to share with you a previously undisclosed Foreclosure Secret. Those that possess The Secret can not only save tons of money but they  will  be empowered to take action and start making money today. To date, I have not shared The Secret with anyone else, for fear that its power to disturb the balance in the foreclosure real estate market. I learned The Secret after years of experience dealing in the distressed property niche and once it came to me I keep seeing evidence of its power everywhere. I suggest you get pen and paper ready, because what you are about to learn will change your search forever.

The Foreclosure Secret is…

There is no secret.

No secret stash of properties no one knows about. No secret list of unearthed deals that could be yours for $39.99/mo. No surefire proven (by whom?) system of tapes and books. No $500 value that’s yours free if you just pay shipping and handling. No foreclosure strategy “they don’t want you to know about”.

Just plain old economics

The numbers are the numbers, folks. And they either work or they don’t. If you buy something for a dollar and sell it for two, you’ll make about seventy eight cents after closing costs. If you rent it for more than you pay out you’ll  have positive cashflow and if you don’t you’ll have negative cashflow. (Note: You should NEVER have negative cashflow.) Learn the basics or let us hold  your hand with them but don’t pay money for publicly available information.

What about the deals?

All major banks liquidate their REO (real estate owned) inventory through real estate brokers that post these properties on the MLS (or HAR). Every single bank owned property can be found there, no exceptions. As far as auction property, it would be in your best interest not to mess with it.

So what should you do?

First, treat yourself to a good dinner … you know, with the money you just saved from not paying those ridiculous membership fees. Then, start your search for Houston Foreclosures and pay a cool “zilch”. While there, you can sign up for email updates (bottom left corner) and receive foreclosures daily in your inbox. Last, start the conversation and ask as many questions as you’d like at 713.952.3200.

Photo Credit: Devilicious Symphonic

[This was originally published on ErionHouston.com on July 17th, 2009]

You have taken that step to the next level. The grind of contract negotiations, offers and counters is now over and you’ve got your name on a shiny executed contract on a great property. At this stage, the first major checkpoint on your journey to closing is the almighty home inspection. So what do you do now?

1. Make sure you get a home inspection.

As common sense as that may sound, I have to put it out there because after all, there’s no requirement that you do a home inspection on your property. The Buyer will sometimes opt out of getting a home inspection in an effort to save money. While that’s their right, its not a very good idea. The cost of the inspection is the cost of peace of mind, and if $300 is all peace of mind costs, you should definitely get it. I know that home may look new and issue free. But certain costly repairs are never visible to the eye much less the untrained eye. Exercise your right to get a licensed pro to inspect one of the biggest purchases you might make in your life time. Get a home inspection.

2. Find a good reputable home inspector

Picking the right inspector for the job can make all the difference in your home inspection experience. You want an inspector that will be thorough, helpful and fair on pricing. First, there’s no time requirement that an inspector has to be at a particular home but I’d say you want an inspector that will spend 3-4 hours + on the task. There’s just no way you can inspect every nook and cranny of an average size home in less than that without rushing. And you don’t want your inspector rushing. Second, inspection report language is convoluted with technical terminology that makes it hard to know when the issue is major or minor. The inspector will note everything on his/her report but you want them to take the time to help you understand what’s major, minor or just compliance. Last, you want an inspector that is fair on his prices. Home inspection prices range anywhere from $200-$450. So long as the price you are being quoted is average with respect to that range, you should be okay. If you want to know which inspector I recommend, you can read his Inspected Thoughts Blog.

3. Attend the inspection if possible

Attending the inspection is not a requirement either but it’s strongly recommended that you attend at least a portion of the inspection if you can make it. Usually we recommend to our clients to be there for the last 45 minutes of the inspection so they can get a first hand tour from the inspector of the issues that he encountered. That way you are not just relying on a report full of technical terms and you can ask follow up questions as well.

4. Go over  the report with your Realtor

The first time anyone reads an inspection report on any property, they get this strong impression that the home is about to collapse tomorrow. To this day, I have not seen a completely “clean” inspection report even on brand new, never live in homes. So you can get a better understanding of what the language really means, leverage the experience of your Realtor and go over the report with him/her.

5. Sometimes you need a specialist

Every inspection has its well defined “scope of work”. Meaning there are some things that the inspector, no matter how good she might be, cannot tell you for sure and will refer you to a specialist. For instance, your inspector may be able to tell you that the AC system is not cooling properly but you may need an AC specialist to tell you why and fix it for you. Or, the inspector can note that there are signs of foundation issues, but you will need a foundation specialist with appropriate tools to diagnose the problems, if any. Good news is most specialists out there offer free or very low priced estimates so you will be able to get the full facts before proceeding forward.

6. Use your Report

Once all the inspection “cards” are on the table, it is time to let them direct your course of action. If the inspection revealed major issues (i.e. foundation is broken in half) that you don’t have the money or inclination to fix, move on. As hard as it may be to take steps back, remember that you did this inspection to keep you from getting in a hairy situation that would cost you thousands. If there are minor issues that are inexpensive to fix, you might make a repair request to or get an allowance from the Seller to cover those. Or if, the issues are negligible, you can move forward confident that you are getting a solid property. You win either way.

[This was originally published on ErionHouston.com on August 11, 2009]

I have never even seen your house, its upgrades, curb appeal or that new air conditioner installed not too long ago. But trust me when I tell you that I know why your home isn’t selling. Whether acting alone, or in combination with each other, there are eight factors that scare away buyers worse then teenage girls at a horror movie screening:

The Price is Wrong

This factor sits at number one for a very good reason. Pricing a home above its true market value in a tough market can cause irreparable damage to your probability of success. Pick an agent that a) doesn’t just pretend but truly knows the market and its intricacies and b) you trust (vital!). Use up all your skepticism in scrutinizing agents but once you decide, listen to their pricing advice and price it right or watch it sit.

Denied Access

How would you feel if you called a financial planner or a CPA for an appointment and she told you to come by her office on Saturday betwen 1:30 and 2:15 because that’s when it would be convenient? Same concept applies to showing your home. All the greatest marketing in the world is going to get a buyer interested in looking at your home, but until they get to see it, there’s no hope for an offer. Lose lengthy prior notice requests, restricting showings to weekends only etc. Make your homes as accessible as possible and maximize your chances.

Dressed for Failure

If the packaging on the candy is sloppy and uninviting, it is less likely to be picked up. The way your home is presented to prospective buyers is crucial in getting that signature on the line which is dotted. Lose the clutter, give every room a purpose and arrange the furniture to allow for pluses in your home to show and shine. Or you can enlist a staging pro and have them do it for you. Staged homes sell faster and for more money. Presentation is all about giving Buyers a glimpse of what their life in the home might be like. What glimpse is yours giving?

Dysfunctional Changes

One of the beauties of home ownership is that one can customize the property to fit their lifestyle. But sometimes, irreversably changing the structure of a property to fit one’s needs may impair its ability to sell fast. Probably the most common dysfunctional change Sellers make is converting the garage into living space. Another is to join two spaces and reduce the room count.

Lack’o'marketing

A well priced home with great access might not get a chance to sell if buyers don’t know that it’s there. Especially in a market with fewer Buyers (lower demand) and plenty of other options (higher supply), marketing has to be world class. And no, putting it on MLS and putting a yardsign will not do the trick. An agent worth her salt will put the latest technology to work to take pro quality Wide Angle photos then weave them into virtual home tours, dedicated single property websites and property profiles that rock. Then she distributes them into portals where buyers are looking and uses their social media leverage on Facebook, Twitter etc. to get the word out. If your home is not getting this type of “spa treatment” you may have a marketing deficiency that a great agent can fill.

Not Ready for Showtime

Living in the property while trying to sell has its advantages and disadvantages. On the one hand, occupied listings tend to show better since the Seller’s furniture can help define the space. On the other, keeping a property ready for showtime can be challenging especially after a few months on the market. But I can’t stress enough how important it is for the property to show well in each and every showing. Remember, real estate is an all or nothing business: it feels like you have achieved nothing until you get an offer and it makes it ALL right.

Unreal Expectations

This is the equivalent of a “come to Jesus” meeting for this article. The Seller, the Agent and Reality all have to be on the same page for things to work out. Just like an agent that wants the seller to give the property away is out of line, so is a Seller that digs in their heels waiting for that Buyer and offer that’s not coming. If 99.8% of homes sold in your subdivision did so at a discount, chances are you’ll have to follow suit. You don’t have to trust your agent on this – just trust the market data he provides. Numbers never lie.

Deferred Maintenance

Unfinished projects, Necessary repairs and perpetually deferred maintenance can all be compensated by a reduction in price, but you will pay much more that way than it costs to actually do the work. Besides, the impression of a well maintained property is the ultimate sales pitch to most persnickety Buyers. So hire a handiman or DIY, but take care of those items and allow your home to sell.

So, there you have it: 8 Factors that keep homes from selling.  Your thoughts?

[This was originally published on ErionHouston.com on July 28th, 2009]

The benefits of purchasing and owning investment real estate are well known or you wouldn’t be here in the first place reading this post. But in order to make that ownership happen, you have to be aware of your financing options and know their pros and cons so you can put them to work within the right investment strategy. One financing options may be a perfect fit for one strategy and Nightmare on Elm Street for another. During our consultation sessions with our clients, this question comes up every single time as it very well should. And we always say, there’s no one-size-fits-all solution – you just have to know your options so you can pick the perfect fit.

1. Conventional Investment Property Loans – This is your plain vanilla, walk-into-Bank-of-America, same as your home mortgage but for income properties, option. With this option, you can finance up to 75% of the purchase price (not ARV!) meaning you have to put down at least 25%. Closing costs are your normal 3-5% of the purchase price depending on whether you escrow your payments (put taxes, insuance and mortgage all in one payment). Interest Rates are the best you can get for investment property, which is typically 1% higher than the rates available for a regular mortgage, so currently they run anywhere from 6.25-6.75%. Credit and Income Requirements are stiffer as lenders typically view these loans as riskier. PROS: Great interest rates keep your expenses low and help your income property cashflow better. All the initial equity in the property you get to keep. Closing costs are lower than other options. CONS: Capital Requirements are high due to high down payment, and this may limit the number of properties you can do depending on your liquid capital (cash).
2. Hard Money Loans – This is your high risk roller, use other people’s money, you don’t need cash or credit (not quite), option. The basic concept behind hard money loans is the idea that the lender is not making the loan based on your credit worthiness but on the quality of the property itself. Depending on the lender and the market conditions, you can get up to 80% of the After-Repaired-Value (ARV) of the property. So if you were to get a property with enough equity (say 70% of ARV) you could effectively get financing to cover the purchase price plus required repairs and closing costs getting in with little or no money of your own. If that sounded great and you’re ready to sign, read the next few sentences. Closing costs on hard money loans tend to be much higher than conventional mortgages (typically normal costs + additional 5% off the top). Interest rates on hard money loans are anywhere from 12-18%. Let that sink in for a moment. The reason for that is risk – hard money lenders are taking a big gamble that you actually know what you’re doing so they will price their money accordingly. High rates and short terms make hard money loans the preferred product for house flippers or rehabbers when they don’t have the working capital to float the deal conventional. This product could be disastrous for an income property as the high interest rates would surely eat any potential cashflow and thrust you into the barren land of negative cashflow. Credit Requirements for hard money loans are much more lax than conventional but there are some minimums you have to meet. PROS: You can use little to no money of your own to purchase and rehab investment real estate. Even investors with challenged credit can qualify. CONS: Excruciatingly high interest rates and closing costs eat up your equity and cashflow. Short  loan terms make it necessary to refinance in the near future (more closing costs). A bad product for income producing real estate.
3. Construction to Permanent Loans – This is your halfway between the first two, use other people’s money but lose the usury, leverage heaven, option. Here’s how it works: Say you found a property for $65k that’s worth $100k. Under this option you would go through two processes – First, the lender would give you a conventional construction loan for say 75% of ARV or $75k. This temporary financing allows you to purchase the property, pay closing costs and have some money left over to rehab the property using a new home construction loan product. Once the property is rehabbed, rented and ready, the lender refinances that mortgage into a 75% conventional mortgage based on the ARV (since now the property has been brough back up to condition). Voila! You were able to purchase the property using very little of your own capital without incurring pawn shop like charges. Closing costs on these loans are quite  bit higher than the straight conventional option but not nearly as high as the hard money option. You are essentially doing two loans so costs should be higher just because of that. Interest Rates are about the same as the conventional option. Credit requirements are high as well. PROS: Cash Requirements are much lower that conventional so you may be able to swing more deals for the buck. Interest Rates are low so this option would be perfect for an income property. CONS: This option utilizes some of the built in equity in the deal to allow for low cash out of pocket so by the time it’s said and done you have less equity in the deal than when you started.

Photo Credit

[This was originally posted on ErionHouston.com on July 24th, 2009]

Income properties are the best and most underutilized investment vehicle available to middle America. They are the best because they offer income, capital preservation, tax benefits and appreciation all in one comprehensive package. They are the most underutilized because regular folks don’t know where to find investment opportunities, think it’s just too hard or consider it too much hassle. When done correctly, investing in income producing real estate is a thing of beauty and I will give you 10 damn good reasons why you should own some.

1. No rollercoaster fluctuations

I’ve got nothing more to say on this except that unlike your 401(k), your investment real estate will not do this:

2. Captured Equity

Due to the combination of plentiful foreclosure inventory and motivated sellers, deals below market value are within reach. We are seeing some foreclosed properties being sold at 20-40% below their true market value. Acquiring these properties at this time would essentially capture this significant level of equity (difference between price paid and market value) that the investor would cash in on when they sell or refinance the property. This one characteristic is hard to match by any other investment vehicle outside of running a pawn shop and who wants to do that?

3. Steady Cashflow

Houston is a very particular market when it comes to investment properties. Despite the fact that we have one of the largest property tax rates in the country, investment properties here break even when purchased at retail price. That means, if you were to purchase a property for $100k that was worth $100k, the incoming rent would cover the expenses of the property in full (in most cases), unlike in the majority of US markets. Now, if in the case of paying retail you break even, that means that if you get a deal, you have .. positive cashflow. What kind of return on investment? Cash on Cash Returns (cashflow over cash investment) we are seeing are in the range of 12-25% per year. Can your investment advisor beat that with any kind of consistency?

4. Tax Benefits

By definition, the IRS does not love many things, but they do have a soft spot for investment real estate. From allowing the paper depreciation of an appreciating asset, to deferred tax like kind exchanges and deductability of most expenses investment real estate certainly gets the royal treatment from the alphabet boys.

5. Appreciation

Given that I’m no Nostradamus, I can’t predict what future appreciation rates will be for our area. But looking at historical data, Houston real estate has been appreciating at a pace of 3-7% per annum pretty consistently. Even if you take a conservative approach and just call it 3%, it definitely ads up for the long term investor (and there’s really no other kind). Based on our median sales price for instance, that’s a jump in value of about $5,000 per year.

6. Additional Equity through Debt Paydown

As you collect rent payments your underlying mortgage on the property is being paid down at at rate of about $600-$800 per year. While it’s not something that will allow you to live in the Hamptons for the rest of your life, little by little we’re building up a pretty nice ROI (return on investment) package, aren’t we?

7. Good Management limits hassle

Every time I talk to a client about owning investment real estate, this question never fails to arrive: “But we don’t want to get calls in the middle of the night about a sink that’s leaking”. That my friends is old skool landlording and it’s no fun. If you buy the right properties and  hire a professional management company or in lieu of that, put a system in place to deal with repair concerns in a disciplined manner, you limit your hassle to watching checks flow in.

8. Favorable landscape

Stars are aligned in favor of investment real estate right now: Low interest rates combined with great deals on foreclosures which happen to be plentiful.  Fertile ground like this is very uncommon. In the eighties we had foreclosure deals abound but interest rates were in the double digits. In the early to mid 2000s, interest rates were low but prices were at their highest. It is very rare for conditions to come together like this so if you were thinking about taking action, the time would be now.

9. Earning 0.5% Interest in your Savings Account sucks

I know everyone has been in a sort of survival mode as of late, but still  there’s no getting around the fact that earning 0.5% interest in your savings account is a Dyson – it never loses suction. Inflation is at 3% for crying out loud – your money is losing money right now when it could be doing so much more in a safe and secure investment. If it’s not sleep-at-night emergency money, a savings account is no place to be right now.

10. Wealth Building

Did you know that a large portion of the overall wealth in this country was built in real estate in distressed times like these? Visionary individuals that had the outlook or the good sense to partner with the right people, stood in the sidelines until opportunities like this presented themselves and they pounced. When you acquire the right properties, in the right growth prone locations at the right discount, cashflow income on 4-5 properties is over $12k a year, the captured equity amounts to six  figures,  while debt paydown, appreciation and tax benefits just sweeten the deal further. Take a look at real estate and then compare it with your current wealth building method. Be honest: Is it even a contest?

That’s all I wrote. If you have any comments, or just want to call me an idiot, please leave them below.

[This was originally posted in ErionHouston.com in August 14, 2009]