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'Clark Smart Real Estate'          Send a link to a friend

[June 06, 2007]  "Clark Smart Real Estate: The Ultimate Guide to Buying and Selling Real Estate." Clark Howard and Mark Meltzer, Hyperion, 2007, 143 pages.

Review by
Richard Sumrall

In his new book, "Clark Smart Real Estate," consumer advocate Clark Howard writes, "If you're looking for a book that will tell how to get rich quick in real estate, how to make money by buying houses with no money down, watching their value soar, and selling them without ever living in them, you have the wrong book." Instead, Howard's five basic principles help potential investors sort through the complexities of the real estate market. Those principles -- buying, selling, investing, financing, and taxes and insurance -- combined with his "save more, spend less and avoid ripoffs" philosophy can help you achieve success in this lucrative market.

Buying

Using good judgment is the key to buying a house -- in other words, don't become emotional about a property. Generally, the most important considerations in house buying are purchasing new houses versus used houses, considering condominiums, buying by the season, buying a fixer-upper and avoiding a buyer's frenzy on a particular property. Other concerns are the school district in which the house is located, flood plain and other geographic issues, property encroachments, and proximity to train tracks, landfills or high-traffic areas.

Selling

According to Howard, selling a house can be a nerve-wracking experience that runs the gamut of emotions: pride, anxiety, fear and uncertainty. When you are ready to sell a house, you first decide whether to sell it yourself or hire an agent. You also want to be aware of the "two-house ballet." Howard describes this as buying and moving into a new house and then trying to sell the old house you still own. He cautions against making this mistake. You will be in the unenviable position of carrying two mortgages; you will still have the constant repair and maintenance expenses of the old house; and you will have the financial burden of the taxes and insurance on two properties. All of this can be compounded if the old house is a "slow seller," a property that can sit on the market for months or years. When you're selling a house, you want to avoid the temptation to sell by a certain date; you should also investigate the selling prices of the other homes in the neighborhood, determine the improvements the house needs to make it market-ready and consider renting out rather than selling the house.

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Investing

Buying and selling real estate is a proven investment opportunity that can increase one's wealth. Aside from the "buy low, sell high" philosophy, investors can use houses to generate income through the rental process. This means you have to decide whether you want to become a landlord. There are many pros and cons to becoming a landlord. Your mortgage payment on the rental property is usually covered by the rental income; your equity grows over time as your depreciation is reduced; and some of your rental income may be considered tax-free (again because of depreciation). On the downside, renters may miss their payments and can cause considerable damage to the house. Failure to conduct a credit check on prospective tenants -- a legitimate business practice -- will not alert you to any potential trouble in collecting the rent. There's also the issue of temperament: Do you have what it takes to be a landlord? Can you handle the late-night calls regarding problems at the house? Do you have the nerve to evict nonpayers, even if they have a family? Investing in real estate for rental income and equity often means deciding between quick profits versus long-term gains, the amount of money you're willing to risk, and how much rental competition you will face in a given locality.

Financing

The first question in financing a real estate transaction is: How will you pay for the property? The standard finance tool is the mortgage. When shopping for a mortgage it's important to know what kind of loan best suits your needs, how to price different mortgage offers (by interest rate, points and closing costs), and how to select the best lender. According to Howard these choices should be influenced by your personal financial circumstances, how long you plan to own the property and the amount of risk you are willing to assume. Your best mortgage deal will be based in part on your personal credit rating and how much you can afford in monthly payments.

Taxes and insurance

Taxes and insurance can adversely affect the profit potential of any real estate deal. In looking at the property taxes on a house you must understand that the actual tax amount may not be reflected in the seller's disclosures. Property taxes can increase if the property has a higher closing sale price or local officials conduct a new assessment. Insurance policies usually contain coverage for the homeowners, mortgage and title. Adequate coverage takes into consideration the physical location of the house and its susceptibility to natural disasters, the rebuilding costs in case of fire, and the claims history on the property.

"Clark Smart Real Estate" is a excellent primer for anyone trying to understand the ins and outs of the real estate market and is recommended for its "practical and information-packed answers to common questions anyone interested in real estate might have."

[Text from file received from Richard Sumrall, Lincoln Public Library District]

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