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Investing in Real Estate - Three Excellent Reasons

by Bill Arey

For those of you that are considering investing in real estate I will discuss three reasons that I know, based on my experience, make investing in real estate something that you should give serious consideration to. 

Reason 1 - Someone (your tenants) will be BUYING YOU A HOUSE! I bought my first rental house October 7, 2005 for $121,500. With closing and settlement costs my initial cash investment was probably around $30,000 - keep that number in mind.  Fast forward to the present............the fair Market value is now approx $140,000 and the mortgage balance has been reduced to $63,000.....and I haven't been paying the mortgage each month - my tenants have. If I were to sell the house now (after paying realtor professional fess and settlement costs) I would net approx $70,000. So the inital $30K will have grown to $70,000..........not bad, but that's not that exciting. Now if I stay the course for another 6.5 years when the mortgage balance will be paid off and assuming the house appreciates in value 1.5-2% a year......the inital $30K investment will have grown to $150,000. Now THAT is pretty exciting!

Reason 2 - FREE CASH FLOW. Free cash flow is what is left over after you collect the monthly rent (A), pay the monthly mortgage note (B), and retain the balance (C)......in other words  A - B = C.  In my real world example I collect $1,250 per month rent, the monthly note is approx $950, leaving $300 per month free cash flow. REAL WORLD CONFESSION - there will be additional costs that come up from time to time and sometime you may go a month or two without a tenant. So to be very conservative, let's say that 50% of the free cash flow will be put aside for maintainence and vacancy contingency and 50% put into another account. The other account might be a college tution fund. So again in my case, 50% of $300 ($150) per month is put in a contingency account and $150 is put in a college tuition account. $150 x 12 months = $1,800........that doesn't seem like much - but over 13.5 years it comes to $24,300. If I stay the course another 6.5 years the amount will be $36,000. So after a total of 20 years of someone else paying the mortgage AND providing a modest monthly free cash flow, the inital $30,000 has grown a value of over $180,000! I can't think of a better way to fund a child's future college tuition cost than investing in a quality rental property and finance it with a 15 - 20 year mortgage.

Reason 3 - TAX BENEFITS and DIVERSIFICATION of INVESTMENT ASSETS - ok......that's actually two reasons. I'm not going to go into detail on these factors. I would suggest you consult with your tax advisor and or financial advisor and discuss these additional reasons. The short answer is: there are tax benefits for property depreciation, insurance cost, maintenance cost, etc......additionally investing in real estate can provide stability and security in your overall investment portfolio. 

For professional advice on investing in residential real estate contact a real estate professional at The Pat Wattam Team at RE/MAX First.   

Bill Arey  REALTOR

The Pat Wattam Team

RE/MAX First

225-329-4349

bill@patwattam.com

 


Reason

Why Capital Heights is so COOL!!

by Pat Wattam

Baton Rouge has a lot of different areas of town but none so ecelectic than Capital Heights!  From the cottage style home, both old and new built to look old, diverse resturants, parks, bike paths, and a good walk score - people live in this area to enjoy a lifestyle.  

Check out Bill Arey's Tour of Capital Heights!

Little Free Libraries

by Bill Arey

The first Little Free Library was built in 2009 by Todd Bol in Hudson, Wisconsin. He mounted a wooden container designed to look like a one-room school house on a post on his lawn and filled it with books as a tribute to his mother, who was a book lover and school teacher. Todd shared his idea with his partner, Rick Brooks, and the idea spread rapidly - soon becoming a worldwide sensation. Little Free Library officially incorporated on May 16,2012 and the IRS officially recognized Little Free Library as a 501c3 nonprofit organization in the same year.  The original goal was to create 2,150 Little Free Libraries. This number was chosen because it would surpass the number of libraries founded by Andrew Carnegie. As of November 2016, there were 50,000 registered Little Free Libraries worldwide. There are many Little Free Libraries in Baton Rouge. 225 Magazine published an excellent article about Baton Rouge's Little Free Libraries 4/27/2016. To read the article click: BR Little Free Libraries

 

Bill Arey  REALTOR

RE/MAX First  The Pat Wattam Team

225-291-1234   225-298-6900

bill@patwattam.com

2936 Lexington Lakes Ave Baton Rouge, LA

by Pat Wattam

BEAUTIFUL home for sale in Lexington Estates! Wonderful combination of elegant style and high tech Smart Home control features. Beautiful lake views. 2936 Lexington Lakes Ave Presented by Bill Arey with the Pat Wattam Team at RE/Max First

I have lived in Baton Rouge all my life and have experienced all the hurricanes that have come through here since the late 1950's. The Greater Baton Rouge area has NEVER experienced anything like "The Great Flood of 2016". I can also say that I have never been prouder of how the citizens of south Louisiana have responded to their neighbors in need. 

More information is coming out daily on what to do to start rebuilding your home. Below is information on loan program available through the FHA to enable homeowners and home buyers to repair flood damaged homes. 

 

What is the FHA 203h Loan?

The FHA 203(h) program allows FHA-qualified lenders to offer FHA loans specifically to those who have either lost their homes in the disaster or have had extensive damage to the home. The FHA rules for 203(h) loans say, “Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area…(these) mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner.”

These loans are no-downpayment mortgages and borrowers may apply for 100% financing of the loan. The FHA requirements for these home loans also includes, “Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing or by the seller, subject to a 6 percent limitation on seller concessions.”

How does the FHA 203(h) Loan Program Work?

The FHA 203(h) mortgage insurance program for disaster victims was created to help victims in Presidentially designated disaster areas get back on their feet. Its purpose is to help those victims become home owners or for those who previously owned a home in the disaster area, to rebuild or purchase a new home.

Like all of the FHA mortgage insurance programs, the FHA 203(h) program reduces lender risk by insuring mortgages made to disaster victims against default by the borrower. This makes mortgages for borrowers in these disaster struck areas more available.

The FHA 203(h)-insured loan offers many of the same benefits as the FHA’s 203(b) mortgage loan and more. Some features of this program for disaster victims are:

  • No down payment:  Unlike the 203(b) mortgage, borrowers with loans insured under Section 203(h) are eligible for 100% financing.
  • Limited Fees:  Many of the fees normally charged by lenders for conventional mortgages are capped under the FHA program. Other fees like property appraisal and inspection fees are actually set by the FHA.
  • Loan Limits:  HUD sets FHA loan limits ($271,050 in the Greater Baton Rouge area) depending on the area where the property is located.

All of these features help to make home ownership more obtainable for individuals in areas struck by disasters.

Applying for an FHA 203(h)-Insured Loan

Again, if your home was severely damaged or destroyed in an area that was subsequently declared a Federal disaster area by the President then you are eligible to apply for assistance under this program. Application for an FHA 203(h) loan must be made within one year of the area being declared a disaster area.

 

Bill Arey  REALTOR

The Pat Wattam Team

ReMax First  

225-329-4349

The Highest and Best Use? - Baton Rouge Real Estate

by Bill Arey

Whenever I drive by this location near the intersection of Old Hammond Hwy and Jefferson Hwy I think back on what used to be at this very location. This location was the epicenter for fine dining in Baton Rouge when I was growing up. I found this brief history in the Baton Rouge Business Report - In 1973 Charles Brandt opened Chalet Brandt, a refined gourmet restaurant, and for the next 30 years the restaurant would serve as one of Baton Rouge’s finest dining establishments. Known for its traditional French cuisine, Chalet Brandt was beloved by locals and renowned for its top-flight service and elegance. In 1995 Brandt sold the restaurant to his son Eric, who continued to operate it until its closing in 2002.  

The original Chalet Brandt building was demolished some years ago and on the site a new restaurant was built - the architectural design is garish and shabby chic. It doesn't strike me as the best and highest use of this once hallowed ground to fine dining.

Bill Arey   REALTOR

The Pat Wattam Team

ReMax First

bill@patwattam.com

How Was The Market in 2015?

by Bill Arey

So "How was the Market?" in 2015. In East Baton Rouge Parish it was quite good. In 2015, 4,592 houses (detatched single family) were sold as compared to 4,199 in 2014. This is an 8.56% increase. Livingston Parish enjoyed an even higher percentage of sales growth at 9.36%. Interestingly, Ascension Parish has had very little growth in yearly home sales. In 2013 - 1,632 homes sold      in 2014 - 1,669 homes sold     and in 2015 - 1,676 homes sold. 

The clear leader in homes sales growth 2013 - 2105 is Livingston Parish with an 18.6% increase. East Baton Rouge Parish had an 8.71% increase, while Ascension Parish had a 2.63% increase. Which parish will enjoy the greatest growth in 2016? I'll let you know a year from now.

Bill Arey    REALTOR

The Pat Wattam Team

Remax First

225-298-6900



Capital Heights

by Bill Arey

When developed by lumberman and real estate developer Charles Roseman, Capital Heights sudivision was considered "out in the country". In one of the city's oldest subdivisions, an influx of young families give life to old homes. Through a proactive, strong civic association formed in 1992, the turnabout has brought an increase in property values and a decrease in crime.    Excerpted from "Historic Neighborhoods of Baton Rouge" by Annabelle M. Armstrong  Published by The History Press

Bill Arey   REALTOR

The Pat Wattam Team

ReMax First

225-298-6900

bill@patwattam.com

What is It About Seeing Water?

by Bill Arey

I love walking around the LSU Lakes. On any giving day you will see hundreds of people, walking, jogging, and riding bikes around the lakes. 

What is it about seeing a body of water that creates a peaceful calm feeling? The health benefits of "green space" are well known....... reserach is now being conducted on  the benefits of "blue space" - the impact of seeing the ocean, rivers, lakes, and even urban water features.

None of us needs "scientific proof" of the effect that seeing a beautiful body of water has on most people. It's hard to put into words, but the effect of "blue space" is undeniable.

 

Bill Arey  REALTOR

The Pat Wattam Team

ReMax First

225-298-6900

Capital Heights - Creativity on Display

by Bill Arey

Capital Heights has a funky charm that draws creative people to live and work. An amazing amount of creativity is happening at the corner of Government and Hebert Streets in the heart of Capital Heights. I'm not sure who the artist is, but the work is wildly imaginative and impressive.

Bill Arey  REALTOR

The Pat Wattam Team

ReMax First

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Pat Wattam
RE/MAX First, Independently Owned and Operated
4750 Sherwood Common
Baton Rouge LA 70816
Office Direct: 225-298-6900
Office Main: 225-291-1234
Fax: 225-295-1234

RE/MAX First
Each Office Independently Owned and Operated
Main: 225-291-1234

Licensed by the Louisiana Real Estate Commission