5 Things Every Real Estate Pro Knows

By Glenn Curtis | Investopedia

Those who consistently make money in real estate know the market. They know the location and the history. They know what new developments are planned. They know the transportation and the schools. They know everything about the area where they invest. They have to know it all.

Staying ahead of the competition in real estate investment means doing your homework. If you are new to the business, it can be daunting, but we'll teach you five tricks that the old pros use to get ahead of the trends instead of chasing them.

Study Local Pricing

The first things to study are the current price trends in the area. For example, a potential investor should look to see if the price of homes is accelerating faster in one area than in others. Next, check to see if the average home price is more than in other neighboring towns. This will provide an idea of where the biggest demand is. Another reason to study these trends is that, over time, you will start to develop a sense for which prices are "fair" for certain properties and which are overpriced. For individuals looking to buy properties at the lowest cost possible, this knowledge can be invaluable.

Realtors and real estate agents are a terrific source for this information given their access to the Multiple Listing Service (or MLS). The local newspaper, the Internet and the town hall may have a record of recent sale prices as well.

Look for a Catalyst

One sign that an area is up-and-coming and that it will be desirable in the future is the development of new infrastructure. When you see new roads and schools being built, it's a sign that the community is set for a growth spurt. Investing in a growing community can be very profitable. In addition, certain types of development, like new shopping centers, may be extremely attractive to homebuyers, and may also help keep the tax base low.

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Spotting new developments can be as easy as looking out your car window as you drive by. Telltale signs of land clearing, surveying or the beginnings of construction in and around major roadways are pretty big tip-offs. Also, look for widening of traffic lanes, the installation of turnaround lanes and the erection of new traffic lights. All suggest the possibility of increased traffic flow.

Next, visit town hall at the municipality or the county level, and speak with the road and the building departments. They should be aware of any major projects slated to begin in the area, and they may even be able to provide you with a connection at the state level so you can find out if any state-owned roads or properties are slated for development as well. Real estate agents also have general idea of what new projects are about to be undertaken.

Explore Low-Tax Alternatives

If there are two towns side by side -- one with high property taxes (or with progressively rising property taxes) and the other with low property taxes -- the one with the lower taxes will usually be more in demand.

Real estate agents can help you determine which areas have the best and worst tax structures. In addition, a simple call to the local tax assessor can reveal how much the town charges in taxes per $100 of house. The assessor can also let you know when the last time the area was evaluated by the township. Also watch to see if a reassessment is set to take place in the near future, as it may mean that property taxes are about to go up. Beware of towns and communities that are becoming overcrowded. Signs include schools filled to capacity and inferior roadways. This could mean the town will have to do some major construction to accommodate the influx of people. And how do they pay for that construction? Tax dollars.

Check the School Rankings

Nearly every state ranks its schools by how well students in each district fare on tests in math and English. Sharp-eyed investors should look for schools that are moving up or are atop the list. These areas are often desirable to parents. Access to quality education is a big selling point to new home buyers.

There are several ways to find this information. Check our your state's board of education website. Also, PSK12.com has public school rankings for most states in its free section. Visiting the schools yourself is also a good idea. Schools that rank the highest are usually quite eager to provide information.

Watch the Outskirts

If the properties in a major city or town have become overpriced, the areas on the outer fringes most likely will soon be in demand. Areas in close proximity to major bus and rail transportation are even more desirable. Nearly any area that is about to install a major train stop or a new major bus route will see its proverbial stock go up in value.

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To find out what's planned, you can check with the local railroad or bus company to see if they will be expanding service in the area. The local town hall or planning department will also have this information.

Bottom Line

It pays to do your homework and to tap local resources to determine which areas are hot now and, more importantly, which ones will be hot in the future. Much of the information is out there and free for the taking. You just have to be willing to do the leg work.

7 home expenses renters don’t pay

By Janet Fowler | Investopedia

When it comes to owning a home, the initial down payment and mortgage payments are just the beginning. There are a number of expenses that you should consider before deciding to purchase your first home. Many of these expenses continue for as long as you own your home - even after the mortgage is paid off.

1. Property Taxes
Property taxes are typically paid to your municipal or local government to fund such things as public works, wages of government workers or public school boards. Homeowners can expect to pay taxes on their home for as long as they own it. Taxes are assessed based on the current value of your home, and can change over time to reflect your home's increase or decrease in value. Property taxes can also vary depending upon the region, so you should always investigate the area you're looking to buy. (Find out what steps you can take to reduce your bill, see Five Tricks For Lowering Your Property Tax.)

2. Home Maintenance
Homeowners can't simply call the landlord when the appliances need to be replaced or the hot water tank stops working. All these home maintenance tasks - and even the larger home renovations - are the responsibility of the homeowner. Whether you're planning a large remodeling project, or just to cover the necessary repairs, it is suggested that homeowners budget at least one per cent of their home's purchase value per year towards maintenance. Therefore, if your home is worth $220,000, you should plan to set aside at least $2,200 towards maintenance costs. Some sources even suggest you should budget for up to four per cent per year, which would be $8,800 on a $220,000 home.

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3. Mortgage Interest
The amount you'll pay in mortgage interest over the duration of your mortgage depends upon the length of time you amortize your mortgage over (or the number of years that it will take you to repay your home loan), the frequency of payments and the rate of interest. The interest rate on your mortgage can fluctuate over time, depending upon the type of mortgage you select. However, for a general idea of how much interest a homeowner can expect to pay over the course of their mortgage, if you have a $220,000 mortgage that is amortized over 30 years at a rate of five per cent, you can expect to pay roughly $205,162 in interest.

4. Home Insurance
Renters may have to pay rental insurance, but homeowner insurance tends to be a lot more expensive. Rental insurance typically covers the contents of the unit you rent; however, homeowners are concerned with the value of the physical structure of their property as well. If a home is lost in a fire or natural disaster, insurance will cover the remainder of their mortgage, or the cost to rebuild or repair the home. Insurance policies offer different levels of protection and coverage, and premiums can vary greatly.

5. Real Estate and Legal Fees
The mere act of buying or selling a home comes with costs. The seller is generally faced with paying the real estate agent fees, which typically come in the form of commission. Commissions are negotiable, but tend to run about six per cent. If you sell your home for $220,000, you can look at paying about $13,200 in commission. Also, both buyer and seller must pay legal fees to cover the transfer of title. Legal fees vary depending upon the lawyer. Of course, the actual cost will depend on the requirements and the experience of the legal team. Real estate lawyers also charge for additional closing costs associated with the purchase or sale of your home, so you should always budget a bit extra. (Property transactions are complex and subject to specific laws and regulations. A professional can simplify the process - check out Attention Home Buyers! Why You Need A Lawyer.)

6. Landscaping and Lawn Care
If your home has a yard, you will definitely need to budget for landscaping and lawn care costs. Paying a landscaping company to care for your lawn could run you about $30 per week. That adds up to between $120 and $150 per month for a basic lawn. If you choose to do the work yourself, your costs will undoubtedly be lower; however, you'll still need to consider expenses like fertilizer, tools and maintenance equipment, tree maintenance and seasonal plants for the garden. Although you might want to think it is free if you do it yourself, you do need to think about the time cost of mowing the lawn or shoveling snow.

7. Home Owners' Association Fees
Some developments charge a Home Owners' Association (HOA) fee or condominium fee. These fees often cover external building maintenance and landscaping costs for common areas. This minimizes the cost of any home expenses that are covered by the HOA fee, though these fees won't cover any internal maintenance costs associated with your unit. HOA fees may not cover maintenance or construction projects if the HOA doesn't have enough money in reserve to cover it. This may result in a hefty cost to owners in the development. Those in HOAs should set some money aside to cover such unforeseen expenses associated with the maintenance of their communal property.

The Bottom Line
Keep in mind that your landlord is paying all these expenses for the property that you're already living in - therefore, all these expenses are being factored into your rent. Other fees could include an extra parking spot, or loss of percentage of the security deposit. Also, real estate values tend to increase over the long term, though the real estate market is definitely not immune to short-term fluctuations. If you can make a long-term commitment to owning a home, there is a definite potential to earn a profit from the sale of your property. Just keep in mind that there are more expenses involved with owning a home than immediately come to mind. Just because your mortgage payments are less than your rent doesn't necessarily mean that you'll come out ahead in the short term.

10 Ways to Increase the Value of Your Home

By Katie Adams | Investopedia

In a dour housing market, wouldn't it be nice to know that your remodeling project would pay off when you went to sell the property? Remodeling Magazine evaluated the top remodeling projects, how the cost-to-value has changed since the housing market implosion, and which projects are still worth the investment. Using the magazine's "Cost Vs. Value Report for 2008-2009," let's look at some of the best projects you can undertake and recoup the majority of your cost.

Upscale Projects

More from Investopedia.com: • Top 8 House-Hunting Mistakes • 10 Insurance Tips for Homeowners • Home Renovations That Don't Boost Resale Value

• Siding Replacement (fiber-cement or foam-backed vinyl). With the economic slump, home buyers aren't being dazzled by bells and whistles as much as they are improvements that will ensure lower repair and utility bills. Although replacing current siding with fiber-cement has lost value from 2007, it still nets an astonishing 87% ROI. If you prefer a foam-backed vinyl product replacement instead, you can still look to recoup 80% of your cost.
• Window Replacement (vinyl or wood). Windows are not only an aesthetic feature. For most homeowners, they represent one of the easiest ways to lower home heating and cooling bills. By replacing your current windows with more efficient vinyl or wood ones, you can save on your utility bills, attract future home buyers and net a nearly 80% (vinyl) or 77% (wood) return on your investment.
  
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• Bathroom Remodel. Depending on the size and amenities of your desired bathroom, you could expect to pay over $50,000 to tear out walls, repair joists and wall studs, change structural elements and make major layout changes, such as switching a toilet and shower. However big the price tag, you can still expect to recoup nearly 71% of the cost (which would be $36,400 if you have a $50K bill) when you go to sell. This project increased its value since 2007, while its sister project – adding a complete bathroom – fell in value.
• Major Kitchen Remodel. Kitchens are typically the most frequently used room in a home, so it makes sense that investing money here is going to pay off when it comes time to sell. While a major kitchen renovation is usually the most time-consuming and expensive home improvement job (averaging more than $110,000), it's also one of the most profitable. Regardless of the size of your financial layout, you can expect to get a nearly 71% ROI.
• Deck Addition (composite product). With families cutting their entertainment budgets, they're spending more time at home, so it makes sense that adding a deck (composite, not wood) is a good investment. You can plan on recouping 63% of your total job cost to boost your home's value by nearly $24,000 if you paid the average job cost of $37,000.

Mid-Range Projects

While all of the mid-range projects dropped in value versus cost since 2007, there are still numerous projects that will net you a significant ROI. Here are a few of the best bets for your money:

• Deck Addition (wood). If your bank balance can't swing the higher price tag that comes with composite decking, you may still be able to afford a wood addition on to your home. While a wood deck would cost you, on average, in the neighborhood of $10,000, the resale value it will add to your home is more than $8,600 – an 81.8% return on your investment.
• Siding Replacement (vinyl). Fiber-cement or foam-banked vinyl are often more preferable siding upgrades, but getting vinyl siding replacements instead is still a good choice. You can recoup nearly 81% of your cost which, if the job cost you more than $10,000, means you could add more than $8,200 to your home's value.
• Minor Kitchen Remodel. With belt-tightening in style, people are turning to minor kitchen improvement projects instead of major overhauls. It turns out that that choice is not only frugal, but financially wise. While major kitchen remodeling jobs can still, on average, return a nice 70% ROI for homeowners, minor kitchen remodeling jobs net an even higher 79.5% return.
• Attic Bedroom. Anytime you can add bedrooms, you're going to add to the overall value – and listed purchase price – to your home. If your attic's dimensions allow you to convert it to a bedroom, you may want to consider investing the money to do so. You'll add some sleeping space and net a nice 74% return when a new buyer puts your home under contract.
• Basement Remodel. If you're fortunate enough to live in an area with a water table high enough to permit basements, you should think about squeezing all the value you can out of it. By remodeling and finishing a previously-unfinished basement you can expect to get nearly 73% of your investment returned with a higher list price, come time to sell.

Conclusion

If you have savings or access to reasonably-priced credit, it's worth it to consider home improvement projects that will produce the best return for your time and money. Make sure you work with a reputable, licensed contractor (to avoid costly errors or budget overruns), and before you undertake any project it's a good idea to check and see if it could significantly increase your property tax bill.

While it may still make sense in the long-run to undertake the project and add overall value to your home, you may need to make a few budgetary changes so that you don't get caught off-guard when the tax bill comes.

Japan Population to Fall 30% by 2060, Adding to Debt Woes

By: Reuters

Japan's population is expected to decline by 30 percent to below 90 million people by 2060, with two out of every five people aged 65 or older, a government agency said, underlining the financial burden on one of the world's fastest-ageing societies.

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Prime Minister Yoshihiko Noda has vowed to double the 5 percent sales tax in two stages by October 2015 to help fund bulging social security costs, which are rising by 1 trillion yen ($13 billion) every year and aggravating a public debt already twice the size of Japan's $5 trillion economy.

But the biggest opposition party, although agreeing about the need for a tax hike, is threatening to block legislation in parliament's upper house. The opposition argues that the ruling Democrats' plan to revamp public pensions would require a higher levy than currently planned.

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"The trend of the ageing society will continue and it is hard to expect the birth rate to rise significantly," Chief Cabinet Secretary Osamu Fujimura told a news conference. "Thus, comprehensive tax and social security reform is needed."

Japan's population is ageing at the fastest pace among developed countries due to a low birthrate and long life expectancy.

The population is expected to fall below 100 million in 2048 and dip further to 86.74 million by 2060, from 128.06 million seen in 2010, according to a projection by a research arm of the health ministry released on Monday.

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By 2060, the number of people aged 14 or younger is forecast to fall by more than half, to 7.91 million.

By contrast, the population of those aged 65 or older is seen rising 18 percent to 34.64 million, accounting for 39.9 percent of the entire population, compared with 23.0 percent estimated in 2010.

The fertility rate, the expected number of children born per couple, is expected to reach 1.35 in 2060 from 1.39 seen in 2010, below 2.08 needed to keep the population from shrinking and compared with the global rate of around 2.5.

The estimate also showed that the average life expectancy will rise by over four years in 2060, to 84.19 for men and 90.93 for women.

The population projection is compiled roughly every five years based on data including a census and demographic statistics and serves as reference materials for government's social security policy.

Copyright 2012 Thomson Reuters

Hopes in Emerging Economies

By: Martin Wolf, Financial Times

Between 2007 and 2012, the Chinese economy will expand by close to 60 percent. Emerging Asia as a whole will grow by almost 50 percent. Over the same period, economies of high-income countries will grow by a mere 3 percent. Who can doubt that the world is undergoing a profound transformation?

The speed of convergence in incomes per head is driving extraordinary divergence in growth between incumbents and newcomers. Moreover, this has continued despite the weak growth of high-income countries discussed last week. Huge shocks, such as those of 2008, do affect the growth rates of emerging economies. The same would probably be true if the euro zone imploded. But the effect does not seem to last.

If we look at emerging economies’ growth in detail, we see that Asia is the most dynamic region, and the one least affected by the global crisis in 2008 and 2009. Sub-Saharan Africa came second to Asia, on both points. Latin America and central and eastern Europe were less dynamic and more vulnerable to adverse external shocks.

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So what now? As the Institute of International Finance, an association of global financial institutions, argues in its latest Capital Market Monitor: “The key question for 2012 is whether the resilient parts of the global economic and financial system – the emerging market economies and the non-financial corporate sectors – are robust enough to cushion the potential impact of high credit risk to the mature economies.”

As is true for the high-income countries, the consensus of forecasts for this year has become gloomier since the beginning of 2011. But the downgrading is fairly modest. In December, China was still forecast to grow by 8.3 percent in 2012 and India by 7.5 percent. Not surprisingly, the data show a proportionately far bigger growth downgrade for central and eastern Europe, largely because of the risks in the euro zone. The view taken of Latin America – notably Brazil – is also gloomier than it was a year ago.

These do not seem implausible “best guesses” of the growth outcome for next year. What are the risks, on the upside and downside?

For the most important emerging economies upside risks may not be important, since their performance is already expected to be so good. Yes, China might grow by 10 percent and India by 9 percent. But that would hardly be a huge surprise. A part of the emerging world that might surprise on the upside is central and eastern Europe, provided the euro zone also does better than feared.

Far more significant is the possibility of big surprises on the downside, particularly for China, which has become such a powerful driving force for other emerging economies, especially commodity exporters. Maybe this is what equity markets seem to be saying, with large declines in the stock market indices since the summer of last year. But, as the adage goes, stock markets have forecast 10 of the past three recessions. The markets of emerging economies are particularly volatile: some are pure casinos.

RELATED LINKS

• Emerging Markets To Rebound Up to 30 Percent in 2012: Strategist
• Forget Decoupling; Analyst Says Euro's Worst Yet to Come

So what are the credible downside risks to big emerging countries?

Some of the vulnerabilities result from growth itself. Development makes a society more mobile, more demanding, and better educated and informed. It also changes the nature of the demands: richer people naturally seek a degree of personal autonomy and engagement in public life. Their concerns also change: China’s income per head is now at levels that have spawned powerful environmental anxieties elsewhere. Thus, a revolution of rising aspirations, reinforced by the new information technologies, constrains what a government can hope to get away with, even in a one-party state.

Furthermore, rapid development is almost always unbalanced. China is no exception. Wen Jiabao, the premier, called China’s economy “unstable, unbalanced, uncoordinated and ultimately unsustainable”. Among the challenges that result are those of managing the transition from investment-led to consumption-led growth and dealing with the aftermath of huge property bubbles.

In addition to such internal vulnerabilities, emerging countries suffer from external ones. The most obvious, at present, is of a huge shock in the high-income countries, probably emanating from the euro zone. Some combination of sovereign defaults, banking failures and even exits from the euro zone by important members would surely create turmoil. If such a low- probability, high-impact event were to occur, the open world economy itself would be threatened – and not just by Europe. The increasingly isolationist temper of the American right might then lead to resurgence of its once traditional protectionism.

A crucial point for emerging countries is access to essential resources at manageable prices. One of the most important novel features of the world economy is that commodities are so expensive, despite the weak growth of the high-income countries. This is a measure of the transformation of the pattern of global economic growth. A big shock to the oil market would be extremely disruptive. Given events in the Gulf, this is not inconceivable.

Yet, against this, remember that emerging countries still retain large opportunities to catch up with the productivity levels of high-income countries. At purchasing power parity, China’s real income per head was barely above a fifth of US levels in 2010. India’s was less than a 10th. These countries continue to enjoy what the economist Alexander Gerschenkron called “advantages of backwardness”. Having started on the road to growth, the chances that they will continue to grow quickly are good.

Moreover, many also possess substantial ability to weather shocks: enormous foreign currency reserves; robust public finances and comfortable external positions. In all these respects, China itself is a fortress. The combination of growth potential, economic momentum and such insurance makes it far more likely than not that growth will be rapid in any given year, in the near term at least. But, over many years, big adverse shocks are likely. As Hamlet argued: “If it be not now, yet it will come – the readiness is all.”

An important additional question is whether sustained growth of emerging countries might pull the high-income countries out of their current sluggishness. The answer is: no. Most of the growth of the high-income countries will continue to come from internal demand. Yet a further rebalancing of today’s pattern of current account surpluses and deficits would certainly help.

In sum, emerging countries, led by Asia, are likely to continue to grow rapidly in 2012, as they did in 2010 and 2011. That is immensely important for human welfare. Yet emerging countries are not immune to low-probability, high-impact disasters – internal, external or, more likely, some combination of the two. While they do have substantial cushions, these may not always be enough. Beyond this, emerging countries will be unable to pull the high-income countries into fast growth. The latter will have to save themselves by their own exertions. This is what leaders of emerging countries argue. They are right.