Tag

real estate

Secrets to the Timeshare Presentation

Time share presentation

Timeshare presentations include free cheap vacations, free gifts or free meals, including champagne breakfast, but not so fast. They are not really free. Because of the high pressure sales it is essential that you do your homework before attending a timeshare presentation, and don’t buy on a whim.

The most important aspect of a time share presentation is to understand what you are NOT buying.

Understand the true meaning of a timeshare and read the contract before you sign under pressure. Most timeshare buyers buy under pressure while on vacation or walking through a mall, to get an invite to a high pressure sales presentation. I have spoken to many who have done this very thing and regretted it later. 

timeshare presentation vacations

The most common question I  am asked is, “should I buy a timeshare to save money on taxes and own a wonderful place to vacation”?

I talked to a friend who did tax audits and was assigned to an 8 inch thick stack of timeshare tax foreclosures. This prompted me decided to look further into the timeshare craze. Later, even going as far as to spend a week in a timeshare condo owned by a friend, I and attended a high pressure sales presentation myself.

Understand the true meaning of real estate and finance, let’s chat

The Definition of a Timeshare

The first thing you need to know is that when you purchase a time share you are purchasing the right to use a vacation room or condo typically for 1 week a year. This is if you purchase 1 unit. The quality of available condos go from type A to type D. A, of course being the nicest and best equipped.

You do not own a share of the building, you do not own a room, and you definitely don’t own the land that the condo is built on. What you buy is one unit of time or one week of time. Some people buy two weeks of time. 

Typical Timeshare Cost

Understand what it means to sign a timeshare contract; you are promising to pay in full the contract price of the time share, the interest payment, and the yearly maintenance fee.

The payment is usually from 8-12 years. The yearly tax and maintenance cost is for life. A lady ask me at a conference, “why did my timeshare company send me to collections”?

I said did you understand that you were purchasing the timeshare with a loan and lifetime maintenance cost when you signed the documents? Of course, she said no.

For some strange reason most timeshare presentations don’t make it clear that the buyers have to pay maintenance for life and the maintenance goes up over time. They assume you know you are signing for a loan. 

the timehare presentation vacations and lifelong timeshare obligation is not Home ownership dream for women

When You Don’t Pay The Time Share Loan Principle And Interest Payments

If you don’t pay the time share principle and interest payments you will be sent to collections. When the balance is not paid from collections, you will be foreclosed on. If your time share is paid off and you do not make the yearly tax and maintenance cost your time share will be sold for back taxes.

How Most Buyers Find Out About Timeshares

They go on vacation, on a honeymoon, or just stay at a resort hotel. The company who owns the hotel may also own timeshare unit building.

They will offer a free $100 bill,  lunch, or dinner to coerce you into listening to a timeshare presentation, which is usually a high pressure sales presentation.

The company gets back the “free stuff” many times over when you make payments on the timeshare loan and the lifetime tax and maintenance cost. So, once again, you learn, there are “no free lunches”.

Take my free Fantastic Finances Course by email

A Motivating Factor For Buying a Timeshare

High sales tactics make some buyers think they are actually purchasing ownership in a condo unit. Some people are motivated by the false tax savings.

Because of the ease at which you can purchase a timeshare many people who buy them  do not itemize for tax savings. Also, they are in too low a tax bracket to actually receive a savings from the timeshare.

For those in higher tax brackets the tax savings on a timeshare is too small to make a difference. Another reason people buy timeshares is because they enjoy the vacation swaps. This is when you can swap timeshares with others, to vacation in different locations. Some timeshare presentation vacations sales are simply fake.

Understand the timeshare presentation and Fantastic Finances Tips eCourse, by eMail, by Lois Center Shabazz, for personal finance for timeshare presentation

When Buyers Falter On Their Time Share Payments

Judging from conversations I have had with timeshare owners many don’t understand their obligations because:
1. They signed up under pressure – did not read the contract.
2. The sign up was quick and didn’t understand what they are buying.
3. Some are young and gullible, so they sign up without the knowledge of contracts.
4. Many people don’t understand that they have to pay taxes and maintenance cost every year for life. This is necessary to use the timeshare “time” alloted to them for the year.

Concentrate on buying “actual” real estate, learn the best way

The best way to get out of your timeshare contract during or after your vacation is to realize you usually have a 3 day right of rescission on contracts. That must be in writing, preferably notarized, and sent next day mail, certified. Rarely, does anyone realize this, or use this tactic.

Typical charges of a Timeshare

I have friends who bought a time share 16 years ago, they said they purchased theirs for $17,000.  Most of the 16 years their yearly tax and maintenance costs were $500 per year, a year ago it changed to $1000 per year. The timeshares are much more expensive now. 

That is a class A Timeshare, the highest value. Let me remind you again that you are “only buying” time to use a space, “not” any real estate.

Currently, a typical Class A time share is in the area of $25,000 principle or more, plus interest, and $1000 per year (lifetime) payments for tax and maintenance. There are different packages available.

learn timeshare presentation vacations and lifelong timeshare obligations with coaching

Selling A Timeshare Condo

Selling a timeshare is difficult because you don’t have the same high pressure sales tactic abilities that enabled you to sign. The market for used timeshare contracts is tiny almost non-existant. You are competing against current new timeshare sales.

There are companies who promise to “exit your  timeshare contracts”, and they may be helpful. Do your homework, and make sure the company is legitimate. In recent news reports many who have used these companies say were ripped off, and their contract was still in tact after they paid the company.

The organizations representing these people say it is best to negotiate directly with the timeshare company to get released from your contract.

You do not have the expertise to do a timeshare presentation on timeshare vacations – to sell it on your own. Don’t make an unwanted timeshare a lifetime timeshare obligation. 

Stay away from timeshare presentations, buy a home, you deserve homeownership

Lois Center-Shabazz | Course Delta Agency

Interested in a Free Discussion about how I can help you with Fantastic Finances? Let’s Chat – Make an Appointment Here

Get Your FREE Fantastic Finances Tips Course by eMail

How I Build Fantastic Finances ; Read More…

Reverse Mortgage Pitfalls Require Senior Homework

Reverse mortgage pitfalls

Understand the reverse mortgage pitfalls so you know the limitations for your heirs and yourself as homeowner:

I have spoken to a few senior citizens who obtained Reverse Mortgages, but felt nothing but regrets afterwards. Perhaps they did not read the fine print in a brochure that is required by FHA to read before they purchase the loan. After getting constant complaints about Reverse Mortgages, the government has changed the program, but there are still many dangers you need to be aware of.

The pitfalls of reverse mortgages, first learn to buy a home the right way
This article will cover the following pitfalls of reverse mortgages:
What is a reverse mortgage?
How does a reverse mortgage differ from a traditional home loan?
The limitations of a reverse mortgage
Homeowners insurance and taxes
When a reverse mortgage must be paid or you are forclosed
Problems heirs have associated with reverse mortgages
Can heirs take over the reverse mortgage or does it have to be paid off?
When are reverse mortgage repaid?

What is a reverse mortgage?

A Reverse Mortgage is a type of loan open to seniors that are at least 62 years who have a home that is paid off or has a low balance, and they live in the house, and follow the terms of the loan.

The problem that many seniors seem to complain about is that they did not understand the very strict terms of the loan before they signed on the dotted line. Some told me the terms were so strict, it made their lives unbearable trying to live under the guidelines and stay in their home.

How does a reverse mortgage differ from a traditional home loan?

The Reverse Mortgage is different than regular home loans in that it pays you from your loan proceeds, and is available regardless of your current income. The up front fees and cost of the loan, usually taken from loan proceeds are very high–much higher than a regular home loan. You are not required to make payments on the loan while all signers on the loan are alive and live in the home. When the last signer of the loan dies or is out of the home for one year, the loan has to be paid off. A amount of time given to pay off the loan is short, so heirs must act quickly.

Home ownership the right way-is pure joy, what is a reverse mortgage

The limitations of a reverse mortgage

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home, sales price or FHA’s mortgage limits, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you may borrow.

Bare in mind that borrowing costs are far greater than a conventional second mortgage, and once you get a reverse mortgage, you can’t get another loan on your home.

Homeowners Insurance and Taxes Must be Paid While You Are in The Home

With a Reverse Mortgage, you don’t pay monthly principal and interest payments and the lender pays you according to the payment plan you select. The payments will accumulate and add a balance to your home as a reverse mortgage loan that will be responsible for your heirs if they wish to keep the home.

Like all homeowners, you are still required to pay your real estate taxes, insurance and other conventional payments like utilities. If you get behind in real estate taxes or other required payments, you could be forced out of your home by foreclosure.

With an FHA Reverse Mortgage you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.” But, you could be forced out for many other reasons, some of them subjective like allowing the home to fall into unacceptable disrepair. Your local property tax holder can foreclose if your property taxes are not paid, so can the reverse mortgage company.

what is a reverse mortgage

A Reverse Mortgage must be repaid in full if you meet the following criteria:

1. When you die or sell the home.
2. When you do not pay property taxes or hazard insurance or violate other obligations.
3. You permanently move to a new principal residence.
4. You, or the last borrower, fail to live in the home for 12 months in a row.
5. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home.
6. You allow the property to deteriorate and do not make necessary repairs.

A subjective evaluation listed above is, “violating other obligations” that are normally listed in fine print. It is important to read all the information you can get from a non-sales person before considering this loan. Another subjective evaluation is if you “allow the property to deteriorate and do not make necessary repairs”. This gives way too much power to the lender to take your home if they feel repairs are not
adequate.

You can receive the money in a few different ways: In payments, in lump sum, or the combination of payments and lump sum. It’s better to receive the money in payments to guard against premature spending.

reverse mortgages repaid

Typical Senior Complaints of Reverse Mortgage Borrowers

Complaints I heard from seniors I consulted with were 1. They felt uneasy with the amount of monitoring. 2. If the money is taken in lump sum, there was a tendency to spend it quickly on unnecessary things. Remember, once the loan is taken, there can’t be another loan taken on the house. 3. Seniors have complained that after taking out a Reverse Mortgage the loan officer strong arms them into taking out expensive insurance they don’t need and can’t afford, such as Long Term Care Insurance.

After doing your research and reading all of the fine print about this loan, call a HUD counselor to be sure you get all of the facts before you decide this loan is for you.

An alternative to a Reverse Mortgage is to sell your house outright, place the money in the bank, and have the bank send you a monthly check to live off, in an inexpensive senior apartment. Another option is a traditional second mortgage IF, you can get a low interest loan AND easily afford the payments, and can  keep up the payments if you are sick or incapacited. You should have a responsible person to help you.

limitations about reverse mortgages

Complaints Heirs Have of Reverse Mortgages

The complaint some heirs have, is they were not successful in getting the remaining equity out of the home when their elderly relative dies. Currently, some heirs have told me, 1. They did not know their parents had a reverse mortgage and therefore did not act quickly to get a mortgage to replace the loan or sell the home. 2. another common complaint heirs have told me is they weren’t given enough time to get a new loan to pay off the reverse mortgage or sell the home and were therefore foreclosed on.

3. One women I talked to who actually worked at a Reverse Mortgage Company says that a common problem was that no one in the family could qualify for a loan to pay off the reverse mortgage before their time expired – the reverse mortgage company only gives them a set number of months.

Some stay in the homes for a few years, but with some it is only six months – it depends on many factors. At least one heir is supposed to take classes with the homeowner so they can get all the facts or the mortgage broker is supposed to give them all of the necessary information. This does not always happen.

HUD on Reverse Mortgages

Can heirs take over the reverse mortgage or does it have to be paid off?

When a homeowner over 62 takes out a reverse mortgage the mortgage payments or principle and interest add up in an account overtime. It does not have to be paid back as long as the person or persons who took out the mortgage are still alive and living in the home. The younger a person is when they take out a reverse mortgage, the higher the balance will be when they pass away if they live long.

Free printables for small business and personal use at MsFinancialSavvy; Daily Action Form, Budgeting Form, and Savings Form

Consumer Finance on Reverse Mortgages

But, what happens to that balance that has accumulated in an account over time? Can the heirs inherit the balance and keep living in the home rent free as the balance continues to accumulate. No! The heirs are required to make contact with the company on a regular basis and let them know that they are working hard to get a new loan to pay off the reverse mortgage balance left by their parents or they are working hard to sell the home.

If there is a balance left after the home is sold and the reverse mortgage is paid off, the heirs will get the balance. If the reverse mortgage is large or has built up for a long time, even if it was small, the balance could be large and leave nothing to the heirs.

Avoiding Reverse Mortgage Pitfalls Work Best When:

The homeowner has read the FHA bulletin on reverse mortgages and taken the reverse mortgages class to understand the loan.

The homeowner has a responsible child with excellent credit who can qualify for a new loan or sell the home as soon as the last homeowner on the loan passes.

Sometimes it is best to take the money in payments, but if there are no responsible heirs it may be best to take all the equity, put it away, live off a small draw from the bank and leave the rest to heirs.

The responsible heir must communicate with the lender and stay in contact after the last homeowner dies to understand how reverse mortgages are repaid.

The homeowner ALWAYS pays required taxes and insurance while in the home. Also, the homeowner must maintain the home.

Because the interest and principle accumulates while the homeowner is alive there is always a possibility that all of the equity may be exhausted and the heirs could get nothing, especially if the homeowner takes the loan early, for example at 62 and dies at 92.

What is a reverse mortgage

Non-Owner Occupied Rental Real Estate As Investment

REAL ESTATE AS INVESTMENT
Non-Owner Occupied Rental Real Estate As Investment

Some investors prefer real estate as investment for long term investing, even though the work is difficult and the costs are very high. Even with property management its hard work. Property management firms are expensive, and when they quit you have to do the work until you find the next manager. You have to rely on property management to show up, tenants to pay their rent and both to properly maintain the property. Every time a tenant moves there are repair and replacement costs, sometimes those cost are huge. You get tax deductions for rental property, but not nearly as much as for owner-occupied property.

Dream your best home - secrets to successful car buying tips for women

Some owners are surprised to find that even if they a have mortgage on rental property, the rents are considered income, and the rental income is taxed.  Landlords have to file a schedule E (supplemental income and loss for landlords) to get all of their deductions associated with rental real estate. To keep tract of everything you are encouraged to keep a spreadsheet. You can get one online, free, one is google drive if you have a gmail account.

It takes a special person to own and maintain real estate as investment in the form of rental real estate. Depending on the cost, type and area is what depends on the difficulty of owning and making a profit off the real estate. Since the cost are very high (and if you get a loan – it is leveraged with debt), it could take a few decades before you see a profit.

The advantages of residential non owner-occupied rental real estate as an investment:

  • It is possible to have high returns when held long-term, if you hit a time in history when real estate is selling and is scarce.
  • You can depreciate the property (this is far more advantages for property purchased prior to 1987 though, the depreciation deduction is much less after that year).
  • You get a deduction for up-keep, but it is much less than the deduction you get for owner-occupied property.

Debt, the wrong kind is crippling. Use good debt to buy a rental property

Disadvantages of residential non-owner occupied rental real estate as an investment:

  • Non owner-occupied mortgage loans carry a higher interest rate than owner-occupied loans.
  • Required down payment for non owner-occupied loans is much higher than owner-occupied loans. In many cases requiring 20%, compared to an owner-occupied loan of 3%-10% down.
  • You must pay capital gains tax on profits, when you sell.
  • Yearly maintenance cost for residential non owner-occupied real estate is usually much higher than owner-occupied cost. Most people simply do not properly maintain property that does not belong to them, and some are very destructive.
  • Long-term maintenance cost can be phenomenally high.
  • It is difficult to find reasonably priced properties in quality neighborhoods.
  • Neighborhoods with a lot of “four rent” signs are particularly difficult to avoid vacancies, it also sends a message.
  • Lost rents are not deductible.
  • A low quality neighborhood (that with high unemployment), brings a low quality tenant, i.e. the default rate on rent payments are high.
  • The debt carried when the rental is leveraged with a mortgage.
  • The constant turnover of new tenants is expensive due to fix up costs each time a renter moves.
  • You have to keep your fingers crossed, that when it comes time to sell, the prices in the are will be high, the type of real estate you own will be in demand, and there will be enough appreciation

Ladies, it takes skills to purchase a home and non-owner occupied rental property

The combination of an owner-occupied/non owner-occupied residential real estate can be a viable consideration for those who feel some form of non owner-occupied rental real estate is a must, as an investment. An example of a combination of residential owner-occupied and non-owner occupied real estate is a four-plex where you live in one unit, and rent the other three.

The advantages of the combination owner-occupied/non-owner occupied real estate investment:

  • You can qualify for the lower interest owner-occupied mortgage loan.
  • You can qualify for the lower down payment of 10% allowed with your owner-occupied real estate.
  • You can deduct the repairs and up keep on the rental portion.
  • You are present to monitor the repairs and encourage maintenance.
  • You can depreciate the rental portion.

You have a better probability of purchasing a property in a quality community since your initial cost are lower than a non-owner occupied property. A quality community brings a higher probability of a quality tenant. Attracting quality tenants is probably the most important aspect of residential non-owner occupied investments. Real estate as investment works when there is a high demand for rental real estate in an area. You will then have a large number of people to choose from.

in 60 days learn to create fantastic finances

Disadvantages of the combination owner-occupied/non-owner  occupied real estate investment:

  • Your tenants may know where you live, if the property is titled in your name.
  • You can only deduct expenses for the rental real estate portion of upkeep, but not your own.
  • You will be liable for normal capital gains taxes on the non-owner occupied portion when you sell. There is a capital gain exclusion on the owner-occupied portion.
  • If you actively participate in rental activities, you can deduct $12,000 in losses if you are single and $25,000 if you are married on all properties you own.

Getting all of your IRS benefits are possible when you keep a spreadsheet of every single income item, expense and money returned to your tenants.

Laws change on just about everything,  yearly. Consult directly with current Internal Revenue publications for the latest changes
about Real Estate as Investment.

See IRS publication 527 at www.irs.gov: Residential Rental Real Estate Property (includes vacation property)
IRS Schedule E – Supplemental Income and Loss From Rental Real Estate

Lois Center-Shabazz | Course Delta Agency

Interested in a Free Discussion about how I can help you with Fantastic Finances? Let’s Chat – Make an Appointment Here

Get Your FREE Fantastic Finances Tips Course by eMail

How I Build Fantastic Finances ; Read More…

GET YOUR MONEY RIGHT, GET  “THE ULTIMATE GUIDE TO A GREAT MONEY WORKOVER 

The ultimate guide to the great money workover

3 Big Problems When You Buy Real Estate to Flip For Profit

When You Buy Real Estate to Flip For Profit it is Tricky
3 Big Problems When You Buy Real Estate to Flip For Profit

Flipping real estate for profit seminars, advertising, and marketing is going on in my town and all over the internet and television. Since I have experience in long term real estate investing and I have friends who have tried to flip for profit, I would like to share some of our experiences.

Home ownership the right way-is pure joy

I, and some of my friend’s own properties out of state and we constantly get letters from people who want to buy our properties? We get letters, cards, brochures and everything in between.

Some of the letters are almost begging us to sell our property to them. Some claim they have all-cash, and others claim they are immediately qualified to buy. Here are many of the problems flippers have with those properties, so you may want to think hard before you answer advertisements to attend a flipping seminar who makes their money up-selling tapes and books after the seminar, that don’t work.

  1. It is Difficult to Find Properties That Aren’t Ready for the Bulldozer

Many of the so-called flippers are going to public records to find owners who live out of state and therefore, their reasoning is that they should want to sell. Many of the properties have family members who are taking care of the properties, living in them, and paying the rent. When you buy real estate to flip the most difficult task is finding a property that is not near condemnation.

Money is more important than you think, understand home buying the right way

The fact that dozens of the flippers are going to public records to find sellers tells me the difficulty they are having finding quality properties to buy and flip. Many of the properties that are readily available are in bad shape, so after renovation there would be no profit. Properties that are held by realtors are already priced for the current market. Those that are auctioned off in foreclosure are usually bid up too high for a profit after renovation.

The surprises, especially to the amateur flippers are enormous. The missed surprises include hidden floor dry rot, floor and wall dry rot, rotten plumbing pipes buried under a slab, large holes in the roof, outside gas leaks, damaged foundation, bad electrical junction boxes in the wall or under the house, clogged main drain, asbestos in the outside shingles or inside in the walls, and mold. These are real life problems I have seen others have when buying a fixer or home to flip.

Any of these problems can take anywhere from $2000 to $20,000 or more to fix, each.

Home buying the right way take skill

  1. Flippers Real Estate Agents Offers That Generate Profits For the Flipper

Flippers contact homeowners and write ridiculously low offers, so they have money to flip for profit after fixing up the property. Most of the offers are rejected, even if the home is in bad shape. If the home is in an area with properties that sell quickly and the resale is high, they constantly beg for offers that are below appraisal. This process is easier in areas were homes have low sales value or with homes that stay on the market for a long time.

These homes tend to have more hidden disasters since they have stayed on the market longer. What happens is that the flipper, out of desperation takes the best offer they can get and after finding they bought a home in bad shape they will hide existing problems or get a false appraisal that is too large.

  1. Most Flippers are Forced to Get Financing from Investors

To buy real estate to flip you must have financing. Banks don’t want to do business with most of the flippers who have no assets, little experience, and may not sell the home before they run out of money for renovation, upkeep after renovation, and mortgage payments until the property sells.

After the flipper finds that the home was overpriced for profit and they find the house is in much worse shape than originally thought, then they find that after sharing their profit with their investor or pricing the home for the market, they don’t have much left after sales, sometimes nothing. Then, this is where the flip begins to turn into a flop. Because of these problems, most flips are not profitable, and many flippers constantly find themselves in deep financial trouble.

The ultimate home buying course for women

Before you think you can buy real estate to flip you should have some command of  both real estate buying and selling, the construction process, and the tax consequences when you have to pay short term taxes. Read the FHA rules to flipping properties.

There are many more facts to consider that you will have the privilege to read when my new eBook about Real Estate Investing comes out.

You can get my sample of “The Ultimate Guide to A Great Money WorkOver” and 7 other eBooks along with expert help with my course.

the ultimate guide to homebuying for women

Lois Center-Shabazz | Course Delta Agency

Interested in a Free Discussion about how I can help you with Fantastic Finances? Let’s Chat – Make an Appointment Here

Get Your FREE Fantastic Finances Tips Course by eMail

How I Build Fantastic Finances ; Read More…