Investing in real estate, whether you're buying a home to live in or purchasing an income property, can be a path to wealth. Or, it can be a horrible boondoggle that saps your savings and cracks your nest egg.
Even if you get a great deal when you purchase a home, you can blow it later by making a poor sale. And sometimes, you're better off staying away from real estate altogether and simply continuing to rent instead.
How can you make sure your next real estate transaction is a smart one?
It helps to know the tricks of the trade:
Smart preparation can help you boost an appraisal
Appraisers are meticulous and precise professionals. But they are people, too, and certain things turn them off, including strong pet odors and stale cigarette smoke.
So, if you are going to sell a property, eliminate lingering scents and "get rid of all the clutter in your home," said Jonathan Miller, the New York-based president and CEO of Miller Samuel, a real estate appraisal and consulting firm. Tidying up "makes the home appear larger," he added.
A home tour video might sell your home faster
More than 80 percent of all buyers now find their homes online, said Ben Salem, who owns Ben Salem Properties in Beverly Hills, Calif. "So when you have a YouTube video that comes up on Realtor.com, that's huge," he said. "The best part is that you're one click away from showing it to the whole world."
Salem has a series of home-tour videos on his website. Catchy music and sharp camera work helps, too. It might cost a few hundred bucks, but it can be worth the investment.
Some home additions add value — others don't
It's important to research home improvements that add value to your home — because some don't. A good rule of thumb is to avoid out-pricing the real estate market: Don't shell out thousands of dollars on fancy renovations that potential home buyers won't be able to afford, especially if homes in your neighborhood don't boast the same types of upgrades.
If you pay too much for unnecessary additions, you will end up wasting thousands of dollars. Instead, focus on modest improvements to your home. For example, stick with remodeling your kitchen or bathroom. Or, work on your home's exterior and replace the front door.
You can talk your way into a quicker sale
Sometimes, your home's appeal comes down to talking up your community's stellar points, from excellent schools to ample green space and nearby entertainment. People looking at your home might not realize these advantages right away, and even your real estate agent might miss some of them.
So, be sure to highlight the neighborhood's best features in order sell your home for a bigger profit. To start, make a checklist of recent exciting developments you've seen, including the addition of upscale restaurants, museums, parks and other amenities.
Turning your home into a trust can cut your taxes
A qualified personal residence trust, or QPRT, allows you to gift your home — in most cases, to your children — yet continue living in the residence, all with the benefit of paying a reduced transfer-tax cost. With a QPRT, you set up an irrevocable trust, yet retain the right to use the home for a predetermined period of time.
Once the term concludes, you can pay rent to your beneficiaries if you want to continue living in the home.
Auctioning your home might be a smart option
With real estate in high demand in some areas, smart homeowners can actually start a bidding war for their properties.
"The most compelling reason for an auction is that a seller can decide when their property will be sold, instead of leaving it to the vagaries of the market, and specifically what date," said Rick Levin, president of Rick Levin & Associates, a Chicago-based real estate auction firm.
"And right now, demand is greater than supply for many homes in many parts of the country," he said. "So you get many types of bidders fighting for the home and driving the price higher until it sells."
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