Many people choose to invest in real estate as a reliable source of passive income. Most often, when someone purchases an investment property, they have one of two intentions: either to rent it out or to resell it (often called flipping a house). Both are great options and have potential for earning. In fact, many first-time buyers choose an investment property before they buy their first home! But investment properties aren't without challenges or risks. Here are five things to consider before investing in real estate:

1. Determine the Type of Investment 

Before searching for potential investment properties, it is wise to think about what type of real estate investment to make. An investor should decide if a "flip and resell" investment or rentable property is their goal. Flipping a home involves making needed repairs and cosmetic updates to increase the home’s resale value. This option is attractive to many people because the payout of this investment occurs as soon as the property is sold. With renting, however, an investor has the benefit of building equity, using rent to pay off the home loan, and enjoying this "passive income" for as long as they own the property. Know that both options require time and money in addition to payments on the property. 

2. Do Research 

A wise real estate investor should find out information about comparable investment properties in the area. If the plan is to resell the home, how is the market in the area? If the property requires upgrades or repairs, will the cost of repairs still allow for a profit considering the price of comparable homes? If the plan is to rent it, is the property located in an area where rental properties are in demand? 

3. Calculate Expenses and Estimate Profits 

Well before purchasing an investment property, along with doing research, an investor will want to take an honest look at their potential expenses and profits. Being analytical about this part will help prevent making decisions based solely on emotions or “hunches.” Although the profits are certainly exciting, the risk is also high, so it’s best not to romanticize investment property ownership. 

4. Secure a Down Payment  

Unlike primary residences where 0-3% down is possible (depending on the loan program), investment properties typically require 15-20% down. If an investor is thinking about buying an a large or multi-unit property, this can be quite a big investment from the start. Remember that 20% down does not account for the money needed to make upgrades or repairs. That’s why many investors take on partners. Which brings us to our next point... 

5. Choose Partners Carefully 

Investing in an income-generating property with a partner can go very well and be profitable, but it can also go badly if the partnership sours. When partnering with friends or family, be careful not to blur the lines between relationship and real estate partnership. Make sure that all aspects are spelled out in a formal contract and consult legal advice before making decisions that could negatively impact the partnership. 

If you’re considering buying a home as an investment property, please contact us for guidance. Our experienced loan officers can help guide you on the best investment loan products that fit your goals.

If you turn on HGTV or open a Good Housekeeping magazine, you are bound to hear or read about “modern farmhouses.” Is this style of home and interior design just a fad, or is it here to stay?  

Originally, farmhouses were characterized as functional and sturdy, typically situated on agricultural land. Farmhouses are beautiful in their straightforward design with little ornamentation and a focus on natural materials, solid construction, and classic colors. Other common elements of this classic style are wraparound porches, larger kitchens, a semi-open floor plan, and a centralized Great Room for family gatherings.  

In 2019 however, many homeowners desire these style elements, no matter where they live. From suburban single-family homes to city lofts, the “modern farmhouse” aesthetic has gained popularity and doesn’t seem to be budging. Why has this happened?  

According to Google Trends, the search term “modern farmhouse” started gaining popularity around 2015. Likely due to the growing viewership of shows like HGTV’s Fixer Upper and trends on Pinterest. Even large home furnishing retailers have jumped on board, creating furniture, appliance, paint colors, and more, specifically to fit a “modern farmhouse.” 

We think this trend is here to stay. Not only does this classic look evoke a home’s coziness, but it also appeals to a feeling of nostalgia for multiple generations. As a blend of both country and industrial design elements, many families feel that this style is neither masculine nor feminine, and the classic design will stand the test of time.  

While not every home or budget can accommodate a wraparound porch, some cornerstone elements of this design style can be incorporated at a more reasonable price point. Consider adapting to an open floor plans characterized by wide entryways and high ceilings or large windows or change aspects of an eat-in kitchen to include an apron sink or butcher block countertops and wide planked natural wood floors. Out with the trendy (and pricey) mirrored glass tiled backsplashes, and in with the timeless (and budget friendly) ceramic subway tiles. 

Whether you live in a housing development or on a city block, you can still incorporate and enjoy design elements of a modern farmhouse in your space. Through your paint color palette, light fixtures, flooring or furniture, you can transform your sweet home into a farmhouse oasis! If you want to get started on any of these upgrades today and are interested in refinancing to do so, please give us a call!

Do you remember the best, state-of-the-art home tech from when you were a child? Maybe it was the next-door neighbor who had a central vacuum system throughout their house, where a hose could be found behind a tiny flap in each room, ready to clean up dust or any messes. To a 5-year-old mind, this ‘smart house’ was amazing.  

Since that central vacuum, home technology has continued to grow and develop. There are some incredibly advanced options available on the market. If you consider yourself a techie and love following the newest releases in smart phones and tablets, wearable tech, TVs, smart home speakers or gaming systems, you might be interested in learning about the latest technology for your home! 

The Latest in Security Upgrades 

There is a doorbell with a built-in HD video camera, microphone, and speaker. This tech allows you to check your phone to see who is knocking at your door, whether you are upstairs or out of town. Available from Nest or SkyBell HD. 

Terrific Temperature Control 

There are smart thermostats that allow you to remotely control the temperature in your home’s rooms and detect hot or cold spots. Options from Nest or Ecobee. 

For the Pet-Parent in All of Us  

If you want to check on your furry friend when you are away from home, you can install a pet camera. Some even allow you to talk to your pet through your phone app or dispense a treat to your dog or cat! 

Wi-Fi Connected Appliances 

Samsung makes an oven with wi-fi connectivity that allows you to adjust its temperature from your smart phone. They also make refrigerators with front facing touch screens and built-in cameras that allow you to see inside from your smartphone, so you always know what to buy when you’re at the grocery store! 

Smart Lighting 

The Drift Lightbulb has a setting that will slowly fade the bulb from on to off over the span of 37 minutes, which they say is the time of an average sunset. Also available from Phillips are Hue smart lights, a series of lighting options that allow you to turn your smart light bulbs on or off, dim, change their color or have an outdoor bulb range for patio mood lighting. 

The Ultimate Spa Experience 

Try a smart bathtub! This tub acts as a Bluetooth speaker to play your favorite songs when empty. When filled with water, the music creates ripples through the water, enhancing your relaxation. 

An Automated Lawn Service  

Robotic vacuum cleaners have been around for years, but have you seen a robotic lawn mower? These lawn mowers use smart shock sensor technology to avoid obstacles in your yard and returns to its charging base when it is done mowing or senses rain! 

Air Quality Control 

With spring’s arrival, many people start to think about their allergies and indoor air quality. In addition to voice or app-activated air conditioners, there are now smart air purifiers that help remove airborne allergens, mold, bacteria, and volatile organic compounds (VOCs) at the molecular level, from room to room. 

Wake Up to the Smell of Coffee. Every Morning, Right on Time. 

With a smart coffee maker, all you need to do is fill the water and whole or ground coffee beans, then set the app for whatever time you want your coffee to start brewing. If a latte is more your thing, smart espresso machines are available as well. Be aware though, adding the bean grinder, milk frother, and a variety of 18 different drink options can increase the price tag. 

Smart Fitness Equipment 

No, they won't do the work out for you, but the trend toward smart, in-home fitness machines could help keep you motivated! A Peloton bike or treadmill or the Mirror have subscriptions that allow you to attend virtual classes with a real instructor in the comfort of your own home. 

While none of these products are necessities, they sure can make your home, and your life, a bit more convenient and fun. As apps become more and more common in our daily lives, from mobile banking to food delivery, home tech will continue to follow this trend. Is there any smart home tech that you are looking forward to seeing in the future? 

With the spring market warming up, many people are going to be filling their weekends with house hunting. But if an affordable, move-in-ready space to fall in love with can’t be found, homebuyers shouldn’t avoid fixer-uppers or older homes. With a renovation specific home loan, potential borrowers can combine the purchase price and the improvement costs into the financing in one loan. 

At Norcom, we offer several loan options for renovations: FHA 203k, Fannie Mae HomeStyle, and the VA Rehab. Below, we’ll outline what you need to know about each type of loan so you can decide which fits your needs best: 

FHA 203k Limited 

• 50% of funds are disbursed at closing  

• Two Draws (50% at closing and 50% upon completion of work)  

• If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection  

• Any changes to the original work order must be submitted to Norcom for approval prior to the work being started  

• Borrower should not pay for anything out of pocket  

• Any request for contingency funds must be submitted to Norcom for approval prior to work starting 

• All items on original work order must be completed prior to any contingency disbursements 

• A 203k loan cannot be used to pay for work that the FHA deems luxuries (ex. outdoor hot tubs, saunas, barbecue pits) 

• A 203k loan is for a primary residence and cannot be used for vacation homes or investment properties 

• Eligible properties include single-family homes, condos in a one-to-four-unit structure, or a qualified manufactured home 

• The 203k Limited loan caps the cost of renovations to $35,000, however there is no minimum cost of repairs 

• Work must begin within 30 days of loan closing  

• All work must be completed within 6 months 

FHA 203k Standard 

• No money will be disbursed at closing  

• There is a 5-draw limit, which is determined prior to closing  

• If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection 

• Norcom requires a progress update every 30 days  

• Contractors General Liability Insurance must be valid through project completion  

• Any changes to the original work order must be submitted to Norcom for approval prior to work being done  

• Borrower should not pay for anything out of pocket  

• Any request for contingency funds must be submitted to Norcom for approval prior to work starting 

• All items on original work order must be completed prior to any contingency disbursements 

• A 203k loan cannot be used to pay for work that the FHA deems luxuries (ex. outdoor hot tubs, saunas, barbecue pits) 

• A 203k loan is for a primary residence and cannot be used for vacation homes or investment properties 

• Eligible properties include single-family homes, condos in a one-to-four-unit structure, or a qualified manufactured home  

• The 203k Standard loan allows for a project costing more than $35,000, however total improvements must cost at least $5,000  

• Work must begin within 30 days of loan closing  

• All work must be completed within 6 months 

Fannie Mae HomeStyle 

• No money will be disbursed at closing  

• There is a 5-draw limit, which is determined prior to closing  

• If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection 

• Norcom requires a progress updated every 30 days  

• Contractors General Liability Insurance must be valid through project completion  

• Any changes to the original work order must be submitted to Norcom for approval prior to work being done  

• Borrower should not pay for anything out of pocket  

• Any request for contingency funds must be submitted to Norcom for approval prior to work starting 

• All items on original work order must be completed prior to any contingency disbursements 

• Can be used to renovate a second home or investment property, if it is an eligible property type 

• Work must begin within 30 days of loan closing  

• All work must be completed within 6 months 

VA Rehab 

• Borrower must qualify for a VA loan to be eligible for the VA Rehab loan  

• 100% Financing of purchase price plus improvements  

• No monthly MI  

• One closing for purchase and rehabilitation  

• Maximum improvement cost cannot exceed $35,000  

• 15% Contingency reserve required  

• All work needs to be completed within 90 days of closing  

• Contractor must be approved by Norcom Mortgage  

• Both purchase and refinance options are available  

• Rehabilitation disbursements are made when work is complete 

As a future homebuyer and potential borrower, remember that you have options, especially if you’ve found a house that’s not picture perfect, but the location is exactly what you had in mind. Reach out to our VP of Renovation Loan Programs, Charlie Napolitano to learn more about your renovation loan options.   

“If I don’t hear the word millennial at least 10 times a day, I think I might have lost my hearing” said Norcom’s Greg Radding on his podcast, Radding’s Rapport, at the end of February. Greg interviewed Mike Fratantoni of the Mortgage Bankers Association about the state of the mortgage market. Among other key points, they spoke about how millennial first-time homebuyers are now one of the largest drivers of the US market, and their presence will undoubtably have an impact on the mortgage industry.  

What it boils down to is in the United States, the most populous age group today are millennials. The typical first-time homebuyer is 31 or 32, so millennials looking to buy homes today are, as Fratantoni explained, “the leading edge of the wave of tremendous housing demand.” This explains why many in the industry believe the purchase market will continue to grow over the next few years. Whether we will see the demand in terms of millennial homebuyers themselves, or the potential landlords of millennial renters remains to be seen. 

One noticeable change for this age group from previous generations is that most millennials are waiting longer to begin the homebuying process. This change is due to multiple factors, including but not limited to, an increase in student loan debt. Furthermore, these homebuyers might be looking for different things in a first home than their parents or grandparents, and they’re taking their time to figure out the details! 

If you are looking to work with millennial first-time homebuyers, here are some points to keep in mind: 

• Millennial borrowers value proximity to popular venues and shopping districts. 

• One of the top factors for millennial first-time homebuyers is the quality of the local school district, whether they have a family yet or not. 

• They are willing to put sweat into their home. Possibly due to the popularity of renovation themed tv shows, homebuyers have more confidence in buying an ‘imperfect’ home and investing in fixing it up and making it their own. 

• Just as with news, commerce, and other fields, millennials are regularly turning to social media to help with the homebuying process. This generation relies on online reviews and recommendations to make purchasing decisions and to decide who to work with as a realtor or mortgage professional. 

• Millennial borrowers are known for their in-depth research into a potential home before scheduling a showing or visiting an open house. 

• Low or no down payment programs are quite popular with this group of first-time homebuyers. 

If you are a first-time homebuyer, we have more information here or reach out to your Norcom loan officer today!