Beth Mergens

Folsom is a great place to live and an even better place to own an investment property evidenced by the numbers of first time investors who came through my open house this past Sunday. Many are just starting their investigation and some don't really know what to expect so I've complied the answers to the seven most common questions about real estate investing.

1. How important is location? Investing in the best location you can afford will dictate the kind of tenants you will attract, and in turn, how much rent you can charge. More desirable neighborhoods appreciate more over time and are less susceptible to the ups and downs of the real estate market.

2. What about repairs? Expect to spend some money on repairs and resist the urge to upgrade. Your thinking should be based on an investment NOT what you would want if you were living there. The rule of thumb is light, bright and clean and remember you will need to factor in new paint and carpet every few years.

3. How do I avoid capital gains? There is a tax rule (1031) that allows for investors to exchange like properties and avoid capital gains so long as you don't take any profit from the sale. This will allow you to build a nice real estate portfolio if that is your retirement strategy. For most small investors real estate is a buy-and-hold investment and a time frame of at least seven to ten years will allow you to ride out any swings in the market and provide a nice cushion for your retirement. Leave the flipping to the seasoned vets and think long term.

4. What are the costs involved? Calculating the property taxes, insurance, utilities, maintenance, and repairs are considered the cost of doing business...more than just the mortgage payment. Vacancy rates vary but if you buy smart you should be able to figure in a conservative 5% which is standard in the industry.

5. Are fixers a good deal? Buying the worst house in the best neighborhood can work to your advantage. Renters look for better schools and neighborhoods and are less picky about floor plans. Deferred maintenance is the usual cause of property repair so if you have the cash on hand and are not afraid of a little work, you can increase your value by some sweat equity. Don't skimp on the major repairs though, always hire a licensed contractor.

6. Can I do the credit checks myself? Pay the extra money to run a full background check when screening future tenants. I can't stress this enough! Running a credit check will give you the basic information that is available electronically but doesn't address issues that can only be found by a phone call or letter. Some states don't make information available electronically so you won't know if they've got child support or other obligations that could impact their ability to pay rent.

7.Where do I learn about landlord rights? The Dept. of Consumer Affairs and HUD websites have everything spelled out. Learn about the eviction process and other potential issues so you can do things right, saving time and money. Remember the goal is to find tenants that pay the rent on time, leave the property in good condition, and don't cause problems with the neighbors. If you would like help finding investment property in Folsom please email me for more information.

For more local information about Folsom, CA to to http://www.FolsomLakeHomes.com

As I finished working with one of my buyers today I noticed another agent researching the statistics for the year when she said aloud "there's only 144 homes for sale in Folsom!"I was a little taken back by that number and asked if she was including condos in the mix. She re-submitted the search and found there were only 163 homes for sale in Folsom. Hummmmm...I had run the same search last night and came up with 326 and then remembered that I included the short sale contingent homes.The bottom line is that currently in Folsom, CA clearly 50% of our inventory is already spoken for and tied up waiting for the banks to make a decision.

So for those buyers who are sitting on the fence wondering if this is a good time to purchase a home, you need to consider that fact that the inventory is half of what it was in the seller's market of 2004. Interest rates are at an all time low and banks are making it more difficult to qualify for a loan so if you find yourself thinking about writing an offer do it before the property gets sold from underneath you. Some other interesting statistics from 2009 are: The total amount of homes sold in Folsom, CA in 2009 was 776 with an average price of $368,233. Currently the number of pending sales are 105 with the average price at $357,035. Happy New Year!

It's been three years into this market and the inventory is starting to look like Wal-Mart's shelves after black Friday. Have we seen the bottom yet, is a constant refrain in my conversations with clients. Congress extended the tax incentive and expanded it to include principle owners, and seller's are seeing multiple offers on choice homes. Does that mean all the deals are gone? Glad you asked.

Some economists think we're bumping along looking for a place to land and others fear we're in for another down hill ride. One thing is certain; it's a good time to buy a home. The trick is knowing what a deal looks like and writing an aggressive offer. Real estate has certain break points that are obvious to those of us who look at houses all day...not so much for the novice. Each tier offers a certain level of "deals" to be had and I'll attempt to define the differences so you can recognize the trends.

For obvious reasons price determines the location but within each area there are grades of desirability. The homes that are typically the lowest priced are bank-owned (REO). They can be damaged and stripped of appliances or have half-completed projects and are usually priced at the bottom of the neighborhood price scale. The banks usually respond quickly but don't do much in the way of repairs. They can be good deals in the lower priced neighborhoods but when it comes to the better zip codes you'll find the competition stiff.

Coming in at a close second are the fixers, which by definition need work to some degree. The nice part about buying a fixer is that there are loans (FHA 203) specifically designed to include the repairs and offers the potential owner their choice regarding those repairs. So if the house needs new carpet, the buyer gets to choose the color and style. Again location, location, location since these homes are much sought after by contractors who have lots of time to work on them.

Next is the much-dreaded short sale. Depending on the skill of the listing agent, these homes can be a great deal but you have to have the patience of a saint. Buyers need to be clear about the waiting period for short sales. Each bank has a different process and some manufacture delays by the methods they demand for submission of offers. Currently I have a short sale that requires submitting the entire package via snail mail, not very efficient given today's technology. These properties are deliberately priced low to attract offers quickly to get the process going. Of course, the bank will send out their appraisers to determine value but if priced right you will find they will accept a solid offer to avoid foreclosing.

The last tier is the forced sale due to some misfortune and the fair market sale, which represent about 25% of the current market. Varying value structures but all are based on the assumption that within a given radius each home would be of equal value given the same degree of interior upgrades, lot size and age of bldg. The bottom line is that every sale that takes place in that neighborhood affects the next sale good or bad, so the deal you buy today might not be the last one found in your neighborhood.

The myth that homes don't sell during the holidays is just that, so why don't people take advantage of the natural marketing that occurs during this time of year? It might seem like a good idea to take your home off the market or hold off from putting it up for sale altogether, but here are some reasons why keeping that For Sale sign up can work to a seller's advantage.

Black Friday signals the beginning of decorating to impress friends and family and this is a natural segue way for selling a home. Colorful lights and pleasant smells all create the "ideal home" which translates into open escrows and closed sales. New holiday towels spruce up the house and keep the decorating budget in check. Take advantage of the emotional connection your home offers and don't forget the cinnamon spiced pinecones on the entrance table.

Initially, getting the house ready can create a sense of orderliness but having to leave every time someone wants to see the house grows old quickly. Holiday shoppers are serious, pre-qualified and ready to buy. Having showings at this time of year reduces the number of "tire-kicker" showings. You can also get away with restricting the showing times, as most people are more respectful for family gatherings.

Did you know that January is the biggest transfer month of the year? Transferring employees use the holidays to shop for their new home and feel pressured to find a home by the end of the year. Additionally, as Dec. 31 draws closer buyers want to have some time for family so make the extra effort to finish inspections quickly. Not only do you have a pool of committed buyers but they start to panic knowing they have to close by yearend so tend to be more agreeable.

Investors are another group of buyers that focus on quick closes at the end of the year. I had one client who didn't want to face his CPA until he closed escrow and with the limited time frame was willing to soften on some of his demands. These serious buyers do not have enough time to start their search over so are more willing to negotiate.

Many sellers hold off listing their property until the spring due to family obligations and entertaining. This means less competition during the winter months, therefore less for a buyer to choose from. So take advantage of the slow down and showcase your home with your favorite holiday décor, you might be pleasantly surprised by how convenient it is to sell during the holidays.