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7 Real Estate Moves You Should Not Make In 2016

Published on Monday - February 01, 2016

Leading agents and investors are reporting a strong start to 2016. One wholesaler even boasted about making more than 90 thousand dollars in a week’s time. Others are just getting started, and are preparing to close on their very first homes and investment properties. Analysts expect the next 10 months to be even better that 2015, as long as people refrain from making regrettable mistakes. That said, here are seven real estate mistakes you shouldn’t make in 2016:

1. Mortgage Fraud

As the real estate market heats up and mortgage lenders more aggressively compete against each other, more investors are hitting the web with stories of mortgage fraud. Most commonly, this is in the form of investors questioning how they can claim to be using a property as a primary residence but in reality, rent it out. That’s not “creative financing”, it is mortgage fraud – and it carries pretty hefty prison sentences. This isn’t a “eureka” moment of genius. It has been attempted by thousands of investors and mortgage workers in the last boom, many of whom are still in prison. It’s just not worth it.

2. Let Mortgage Bankers Take Advantage of You

The new TRID rules that rolled out last year cost billions of dollars for the industry to implement and has drawn out real estate closing times. What it hasn’t achieved is slowing down bait and switch tactics by unscrupulous mortgage companies. As of February 2016, BankRate.com reports that average mortgage rates have fallen every week this year. If your mortgage company has been increasing your rates, then they better have some good answers for you as to why. And it’s not because of “the market”. There are some legitimate reasons for rates to go u, and terms to worsen during the process. Sometimes rates do go up. Sometimes factors change like property types, loan amounts, and credit scores. Or loan officers make genuine mistakes. Unfortunately, others just low ball borrowers upfront and hit them for more money at closing – and with higher interest rates and payments. They count on borrowers being too afraid of losing deposits or complaining. Don’t be a victim. Don’t let them continue to get away with it. If you have your contract done right, you won’t lose your deposit and will have more time to get another loan somewhere else.

3. Skimping On Title Insurance

You should always get title insurance. Period. Title insurance is even more important than homeowners’, interior, and any other insurance. Without title insurance, the title to your property – and your entire investment – can be stolen extremely easily. If not outright swiped, the title to your property can be clouded and tied up to the point where you can’t sell or refinance. Getting a title search is not a supplement for insurance.

4. Speculate on Rising Property Values

US property values are expected to rise through 2016. In fact, various external factors at work ought to keep pushing American real estate prices higher. However, that is no excuse for real estate investors to trade in sound financial strategies for sheer gambling. There is no need for it. Make your money when you buy; either in acquiring cash flowing rentals or discounts. Any price appreciation and further equity is just the icing on the cake.

5. Negative Cash Flow Real Estate Deals

There may be some circumstances where the only real estate deals available are those with negative cash flow.  Perhaps if you live in Australia and have tons of excess cash to fill in the gaps each month, that’s okay. But there is no need for US real estate investors to be taking on those deals right now. There are plenty of rentals with great spreads. Go find them.

6. Adjustable Rate Mortgage Loans

For a few investors on select deals, ARMs may appear to make sense, as can other short term loans. But there is no question that interest rates are headed up and veterans know there are no guarantees of being able to refinance later, or what those terms will be. If you must, take a short term loan to give yourself plenty of cushion. If you plan to buy and hold rentals, recognize that few of us may live to see mortgage interest rates this low again. If history repeats itself, we’ll see 17 percent home loan rates again before they ever go this low.

7. Sitting Idle

We are currently seeing the best combination of prices, rates, rents, and value trends.  For those who want to build wealth and passive income in their lifetimes, this is the time to go all out. Don’t overlook the importance of these opportunities for locking in rates and great cash flow. There are plenty of deals out there. In the next few months, 58 thousand Detroit area foreclosures are slated to hit the market from just 500 dollars. Look hard, build connections, and you’ll find plenty more deals from coast to coast.

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