My New Blog

An excerpt from my book...

The Smart Money Guide
to Owning a
Great Home
AND
a Great
Investment

By F. J. “FLIP” KENYON
Copyright © 2006 F. Kenyon, Incorporated / Palladian Publishing

For a complete copy, visit my "shop" page at FloridaValue.com. 

About the Author
Floyd J. “Flip” Kenyon graduated from Wake Forest
University and worked in marketing and real estate
in New York City and Tampa before starting his own
firm, Kenyon Real Estate Appraisal & Investment, a
Tampa-based real estate brokerage corporation.
Presently, he is a real estate investor, licensed real
estate broker and a state-certified residential real
estate appraiser. Having signed over 10,000
appraisal reports, managed and closed numerous
real estate investment deals, and represented many
real estate buyers, he is an expert in the field of
real estate valuation and investment.
To learn more about his company, visit his web site:
www.FloridaValue.com
or contact him at:
KENYON REAL ESTATE
Appraisal & Investment
P.O. Box 342035
Tampa, Florida 33694
Phone: (813) 920-7700
E-mail address: FKenyon@FloridaValue.com

There are ten steps to buying the best home at the
lowest price with the greatest investment potential.
Each chapter in this book represents one of these
steps. Below is a summary of what you’re about to
read:
Step (1) Consider the benefits, risks and
commitment of a home purchase. Analyze your
personal financial and tax situation. What can you
afford and what do you need? Make the decision to
buy now or wait until the time is right.
Step (2) Shop loan sources, consider mortgage types,
become pre-qualified for a loan and verify that you
are financially ready to buy.
Step (3) Hire a good real estate agent who
specializes in buyer representation, discuss your
housing needs, and understand how your agent can
help you buy a home.
Step (4) Decide on a lender, apply for loan and set a
specific budget through the pre-approval process.
Step (5) Consider how you would legally own your
home, and decide on the location, design, and type
of home you want.
17
Step (6) Conduct routine, efficient searches for a
home with your broker’s guidance, consider real
estate investment factors and select a home to buy.
Step (7) Estimate the market value of the residence
via a Comparative Market Analysis or state-certified
residential real estate appraisal.
Step (8) Prepare an offer using a contract for sale
based on your estimate of value of the home,
negotiate and execute the final contract, and have
the home inspected.
Step (9) Buy homeowner’s insurance and provide the
lender with other required items for final loan
approval, review closing costs, perform the final
walk-through of your home and attend the closing.
Step (10) Move into your home and renovate over
time, considering appropriate, smart money home
improvement projects and methods for financing the
work.

Here's step (chapter) #6 in more detail...

Step 6
House Hunting and Your
Home’s Investment
Potential
Now that you have a very specific idea of what you
want in a home, you can start searching. For most
people, the purchase of a home is the single largest
investment of their life. You should view it as an
investment, first and foremost. Unfortunately many
buyers do not do this, mostly because they don’t
understand the factors affecting real estate value.
It’s everyone’s goal to get a great buy on their
home. However, future value potential or the
appreciation of the property over time is what
buyers really need to be concerned with.
You can fall in love with a home that is a good investment just as easily
as you can fall in love with a home that is a bad
investment. You should love your home, but you
should also think of the long-term financial
implications of the choices you make when
purchasing the home. Again, remember to think of
the home as an investment first. Let’s consider some
tips that can help.

Hunting Efficiently: Locating
the Best Home in the Least
Amount of Time
According to the National Association of Realtors
survey, “The Home Buying and Selling Process 1997,”
the typical home buyer searched a median of eight
weeks to find the home ultimately purchased, and
examined a median number of 10 homes. The time it
takes to find a home can take days or many months,
depending on your housing needs, the availability of
residences, and how efficiently you conduct your
search.
Finding a home has a lot to do with being aware of
opportunities, acting fast when that opportunity
arises, and beating competitive buyers to the punch.
With today’s Multiple Listing Service and the
advanced computer systems used to search listings,
your agent has the capability of making you aware of
every home actively listed for sale that suits your
needs.
Having specified certain search parameters, current
on-line systems can even show digital pictures of
your potential home from a computer screen. Many
times a home listed for sale can be eliminated from
your search without even visiting the property.
These systems can even offer photos of neighboring
homes and street scenes. Public records can also be
accessed, offering other pertinent information, like
previous purchase prices and property taxes.

Explain in detail to your agent your housing
requirements and request that you be provided with
all applicable new listings on a frequent basis. View
these homes routinely. Use your real estate agent as
your only information source on new listings.
Internet sites that detail only a certain company’s
listings do not cover all of the available housing
possibilities. Your agent will have access to those
same listings and will specify only those homes that
are right for you. Do not look in the newspaper or
drive the streets randomly looking for homes. Driving
around to get a feel for a neighborhood in general is
fine, as long as you do not concern yourself with
specific “for sale” signs. This is a waste of time. If
you find a house on your own and the house is not on
the list provided by your agent, chances are some
aspect of the home does not suit your needs. For
example, the home may be out of your price range
or may not have enough bathrooms. The goal is to
find a home that suits all of your needs, not just a
few.
Only about 10 percent of all sales are For Sale by
Owner or “F.S.B.O.” As a general rule, beware of
these homes. Sellers not represented by an agent
tend to overprice their homes, lack objectivity, may
not be serious about selling and generally may not
know what they are doing. Purchasing a F.S.B.O. is
not a way to save money. By selling on their own and
saving commissions, sellers do not pass the savings
on to you as the buyer. Why should they? It is a
common misconception that you get a better deal by
targeting a F.S.B.O. In fact, you most likely will
spend too much money because the seller’s asking
price is usually inflated.

Without the knowledge of comparable market data,
many people think their home is worth more than it
is. This is a case of perception vs. reality. It’s like
going to a factory outlet mall, hoping for a bargain
because you think you are cutting out the
middleman. In reality, the prices may be the same
or higher. The transaction may also take longer and
be more costly because you’re dealing with a seller
less experienced in selling a home. Legal issues, title
and repair problems may also arise and, unlike a real
estate professional, the owners don’t have the
expertise to handle these issues.
Once in a great while you can find a good deal with a
F.S.B.O. mainly because sellers don’t know what
their home is worth. They do under price their
homes on occasion, so being aware of what is a good
value in a certain area is important. Your agent or
real estate appraiser can be an enormous benefit in
this area. Real estate agents can still represent you
in a F.S.B.O. transaction, but may be paid out of the
proceeds of closing or on an hourly basis. Most
sellers are still willing to pay a 2- to 3-percent
commission to the buyer’s agent. This should be
discussed during your initial conversations with the
agent.
Many buyers also believe foreclosures are another
way of finding a bargain. Because of this
misconception, there are actually more competitive
buyers drawn to bidding on foreclosures. The truth is
that most foreclosures are actually purchased at or
above market value! This bargain hunting frenzy
actually drives the price up, and foreclosures usually
are the properties that need the most work.

Not only
are buyers paying top dollar, but extensive
renovations are often required.
Buying at auction is also a risk. Depending on how
the auction is conducted, the property may have
problems that can’t be detected prior to purchase.
As properties are purchased “as is,” clear title or
structural soundness can’t be guaranteed. Bargain
hunting competitive buyers also may drive the price
up over market value.
As you visit homes for sale, ask questions but say
nothing positive out loud to the seller or the seller’s
agent. Keep a real poker face. Acting desperate to
buy can be used against you in the negotiation
process. Your agent will have paperwork on each
home you visit. This may include pictures, public
records, Multiple Listing Service fact sheets, floor
plans or surveys of the homes. Make notes on the
positive and negative aspects of each home. Picture
yourself living in the home.
Most homes can be ruled out before even going
inside. Look at neighboring houses. Remember that
these next-door neighbors’ homes can affect the
value of the home you are considering. If possible,
interview the neighbors. This will give you more
information about the community, the seller’s
situation and the neighbor’s personality. This could
be your neighbor someday, so it’s important.
Consider the general location of the home and its
proximity to schools, shopping and other important
support facilities. Don’t be afraid to re-visit a home
that shows potential. Try to view the home during
the day and at night. You will get a different
perspective, since properties can look different at

various times and you may have missed something
the first time around.
As you search, keep in mind you will likely give up
something you now consider important. You might
decide that a gourmet kitchen is not as crucial as
you thought it was. Keep in mind the things you
must have, such as a garage, a second bathroom or a
third bedroom. Prioritize by making a list of
desirable items in order of importance. Don’t get
bogged down in details. Don’t consider whether your
furniture will fit in a certain room. Throw out your
tape measure. Don’t rule out a good deal because
your $150 couch won’t fit in a room.
If you have searched for a while but can’t find your
dream home, your agent can also help you locate
building lots and builders. You can build a new home
to the exact specifications you would like. Many new
developments feature packages where the builder
acts as a developer as well. You can buy the land
and building in one package and use a construction
loan to finance the deal.
Dealing with a builder is similar to dealing with
another seller, except price is not as negotiable.
Especially with larger builders, prices are normally
pre-set and are based on standard model designs.
Most builders will cooperate with real estate agents
and will pay their commission, which is usually 2 to 4
percent of the cost to build. If you show up at a
builder’s office without an agent, you will not
receive a discount for the commission. So it can be
helpful to you as a buyer to have your agent helping
you through this process as well.

Another option is to find a highly depreciated home
in a good location and tear it down. Tear-downs are
becoming more and more popular as desirable
neighborhoods are becoming more and more builtup.
Vacant parcels in those neighborhoods can be
hard to find and properties with older, poorly kept
homes can sell for the same price as vacant parcels.
Sometimes these homes rest on two or more
buildable lots. If the zoning permits, tearing down
one home can offer the ability to build two or more
homes. Some smart buyers do this and completely
fund their land purchase by selling off the extra
parcel. Ask your agent to look for homes like this if
vacant parcels are not available.
Whatever route you choose, be patient. The process
of actually finding a home that is a good investment
takes time.

20 Ways to Maximize
Investment Potential When
Choosing Your Home
The following tips will help you choose and purchase
a home that can be sold someday for a big profit.
Remember, if you’re buying a home with resale
value in mind, there are some rules to follow.
Obviously, you may not meet all of these guidelines,
but if you want to own a great investment, try for as
many as possible. We suggest that you:
(1) Buy the least valuable home on the block. The
Economic Theory of Conformity states that values
tend to conform to the median or average sales price
within the market. When most of the homes in your
neighborhood are of a higher value than your own,
your home’s value will tend to rise at a greater rate
than if it was located in a neighborhood of lesservalued
homes. If you buy the most valuable home in
the neighborhood, the home may still go up in value,
but at a much lesser rate. This rule tends to hold
true for any property type. We’re not saying you
should buy a poor quality home or a home so small
that it is not marketable. Just be concerned with the
size, condition and construction quality of the homes
immediately surrounding the home under
consideration and never buy a home that is overimproved
for the neighborhood.
(2) Hire a real estate agent. Buying a home is becoming
more and more complex. Think of the paperwork,
inspections, negotiations and financing. Without an
agent, how will you access the up-to-date
information of all actively listed properties for sale?
How will you efficiently conduct a search for a
home? Do you have the time necessary to find the
right property at the right price? A real estate agent
can effectively help you find a home and help you
through each step of the process. And, the seller is
the one traditionally responsible for paying the fee
for this service! You have nothing to lose.
(3) Hire a real estate agent who is competent and
specializes in buyer representation. This is crucial.
Inexperienced and incompetent real estate
salespersons are out there, so be careful to choose
an agent who is college educated, experienced and
specializes in buyer representation. A buyer’s agent
is the one that is expert in the needs of the buyer
and is required to fight for the buyer’s best
interests, including negotiating the lowest possible
sales price. Never buy from a seller’s agent or a dual
agent, as there might be a conflict of interest.
(4) Buy residences with minor cosmetic defects. Homes
that have minor defects can be cleaned up with
minimal expense. These defects will keep other, less
knowledgeable buyers from making competitive
offers and can drive the price down to bargain
levels. Bidding wars tend to occur on homes that are
in perfect shape. Consider the cost to cure the
problems of a home and don’t pass up a good deal
because of a minor defect. Focus on the potential of
a home. The small money and effort you put into the
cosmetics of the home could pay large dividends
when reselling.
(5) Avoid homes with major structural damage or
adverse conditions. A home inspection will identify if
the home has major structural damage. Major
repairs can translate into major money out the
window. Foundation, roof or other structural
problems are the most common reasons people lose
money when repairs are necessary. Also watch out
for “toxic homes,” where lead paint, radon gas or
asbestos causes a health hazard. Avoid homes where
street noise or outdoor foul odors are prevalent.
Make sure your contract lets you walk away if the
home is unsound in any way. Know the cost of
repairs and have these estimates included in the
inspection report. Also know the “Remaining
Economic Life” of the property component, or the
amount of time remaining before the item needs
replacing. If something big needs replacing during
your ownership period, it still translates into big
expense for you. (See Step 8 for further details.)
(6) Look for motivated sellers. A motivated seller will
be ready to bargain with you. When an owner
relocates or lives out of town, dies, becomes ill, has
already bought another home, gets a divorce, has
family members leaving or entering the home, has
financial difficulties, or has had his home on the
market for a long time, there may be a motivation to
sell. Try to find out why the seller is selling. Simply
ask the seller or ask a neighbor. Refuse to make an
offer until you know the reason the property is for
sale. Claim you are fearful of buying someone else’s
problems. A less urgent selling situation can mean
less room for negotiation and a higher sales price.
(7) Buy a home located in a neighborhood with a history
of strong appreciation in value. Your real estate
agent will probably know the areas that appreciate
the most and can find recent sales in any area you
choose. County property tax records are available to
anyone and will show you what an owner originally
paid for his or her home. This is a good way to
measure how much, if at all, a home has
appreciated in value. If an individual home has no
history of previous sales, as with newer construction,
its general neighborhood sales history can be a
reliable indicator of price appreciation. Past trends
of appreciation don’t always guarantee that a
certain rate will continue in the future. Yet, most of
the time the recent rate of neighborhood
appreciation continues into a buyer’s ownership
period. On average, expect anywhere from 3- to 10-
percent rates. Anything above 5 percent is terrific.
(8) Be less concerned with getting a bargain and be
more concerned with a property’s potential for
future appreciation. The resale value, or the future
sales price of your home, may be more important
than the original purchase price of the property
when considering your total return on investment.
Chances are you will not find a quality home for too
much under market value, anyway, even if the seller
is motivated. If a property goes up in value, it means
the property is marketable and will be sold at
market value.
However, most people want a bargain. Consider
Stephanie, who buys a home at market value. The
home then appreciates $20,000 in value in three
years. Now consider Bill, who buys a property for
$5,000 under market value, yet that home
appreciates only $5,000 in three years. Stephanie
has netted $20,000, while Bill is up only $10,000.
And this rate of appreciation is likely to continue for
both as long as they own their properties!
(9) Buy a home in the heart of the action. Scarcity is
another major concept of value. When there’s a
limited supply relative to the demand for a type of
product, like waterfront or certain downtown
properties, the product will be marketable and its
value will rise. Consider what makes a home
marketable: location, location, location. For
example, the most central, exclusive areas of New
York City, San Francisco, Los Angeles, Boston,
Philadelphia, and the waterfront areas of, well, just
about any place, are greatly appreciating in value.
Future buyers of your home want to be in the center
of a great location.
(10) Buy a home with a timeless, popular design or
architecture. Avoid stressing your own personal
preferences if they are different from the norm. The
funky home you want now could look dated when
you try to resell it. You could lose thousands of
dollars on a design that only you could love. Again,
think marketability. You want to appeal to the
masses, and the majority of people are drawn to
popular, timeless designs and architecture. If you
dare to be different, don’t do it with the biggest
investment of your life.
(11) Buy a home with a logical, functional floor plan.
The utility of a home, or its ability to satisfy a
person’s housing needs, is important. Look out for
low ceilings, choppy, small rooms, having to go
through one bedroom to get to another, and
disproportionate numbers of bedrooms to bathrooms
to living areas. Think of what is functional, logical
and appealing. Open, bright areas and spacious
vaulted ceilings should be popular for years to come.
You’ll be happier in the long run with a home that
has a sensible floor plan, and you’ll satisfy the needs
of future buyers of your home.
(12) Appraise the home before you make an offer. Why
not? You will have to get an appraisal of the
property before the lender will approve your
application for a loan. Why not know in advance
what to offer? An offer should never be based on the
seller’s list price, but on your estimate of market
value. Although you should be less concerned with
getting a bargain if a property has great investment
potential, you don’t want to pay too much for a
property. Having the information that an appraisal
gives you is priceless during the negotiation process.
If getting an appraisal is not possible, at least have
your real estate agent do a Comparative Market
Analysis or pull some comparable sales for you.
(13) Buy a home that will be suitable for you and your
family in the future. Plan on future needs. This
prevents major expense in renovations and upgrades
over time. Buy a home you can grow into. Even
though two bedrooms may be suitable now, a fourbedroom
home may be needed before you know it.
The cost of adding a wing to a home may prevent
future resale profit. Once you’ve made your
purchase, upgrade or change the residence only with
improvements that will boost value. This will be
discussed further in the last chapter.
(14) Be in a position to act fast, because smart money
deals go quickly. Before you start your search for a
home, make sure you are in a position to make an
offer immediately if necessary. Your dream home
could be the first one you see, and if it’s a good
deal, other buyers will know it. Remember that you
are in competition with other buyers who are ready
to snatch a good deal away from you. Be ready
financially, know what you want, and be able to
respond to your agent when a new home listing
comes on the market. Remember to be pre-approved
for a loan amount. Be decisive and either go for it or
forget about the home and move on to the next one.
New listings and good deals appear every day, so be
ready.
(15) Prioritize and concentrate on the major aspects of
a home. Don’t get caught up in all the little details
of a home and let its most important aspects be a
lesser priority. Realize that no home will have
everything you want. Location, square footage, year
built, construction quality and architectural design
are more important than the color of the walls or
whether your furniture will fit in the home. Don’t
pass up a good deal because of a couch or minor
imperfections in a home that can be easily changed
at little expense. Get the big picture.
(16) Avoid homes involved in a bidding war. You may
always be in competition with other buyers, but if
more than one party is bidding on a home at the
same time, the price can be driven up above market
value. Know the maximum amount to spend, and
avoid homes, no matter how attractive, that are
involved in a bidding war. Buy with your head, not
your heart. Buying frenzies tend to happen when
people fall in love with a particular home, forgetting
that there are many other homes out there to buy.
(17) Select a home with good access or proximity to
quality support facilities, like good schools,
shopping and recreation. Sending the kids to a good
school and easy access to shopping or recreation is
obviously important. This may mean the home is
located either in close proximity to these support
facilities, or easy access is possible by way of car,
train or other form of transportation. Therefore, a
more rural home can still be marketable if a major
highway is nearby or the home is within a good
school district. Make sure the roads leading to the
home are in good shape and paved. Test the roads
by driving from the home to downtown, schools and
shopping. In real estate, a property’s accessibility is
sometimes referred to as a “linkage” and is a major
factor in strong resale potential.
(18) Be aware of future growth plans for the
neighborhood. We’ve mentioned the importance of
analyzing past trends of appreciation within a
neighborhood as a way of possibly predicting future
investment potential, but you should also be aware
of an area’s plans for the future. Know if a
neighborhood will soon undergo rezoning, if new
residential construction is about to begin nearby, or
if a new highway, shopping mall or school is being
planned. These events can have a positive or
negative affect on the value of your home.
Know your neighborhood’s current phase of
development. The transitional phases of a
neighborhood are the development phase (new
construction, occurs during the first year to ten
years), the stability phase (occurs during the next
ten to fifty years), the digression phase (lasts ten to
twenty years), and the restoration phase (lasts five
to twenty years or more). The only phase to avoid
when buying is the digression phase, as it is
characterized by a decline in the condition and
values of properties. Tear-downs or extensive
renovation projects occur within a neighborhood
during the restoration phase, and are good signs that
the area’s land value is rising. If you buy in the
direction of positive growth, even a more rural
property that presently breaks all the rules
mentioned can be a great area for investment. John
Jacob Astor was one of the first people in America to
strike it rich in real estate by buying land in the
direction of growth. He bought mostly unwanted
farmland in Manhattan in the early 1800s, just
outside of the already developed areas. As
development and demand grew into the areas owned
by Astor, so did his wealth.
(19) Know present market conditions and interest rates.
Is this a buyer’s market or a seller’s market? This
shouldn’t affect whether or not you buy or the
timing of your purchase, because it is impossible to
predict what the real estate market will do in the
future. Yet, it should affect how much you offer.
Know present market conditions. If you’re in a
buyer’s market, your offer can be lower than normal
because there is a surplus of homes from which to
choose. If it takes less than an average of 45 days to
sell a home in a given neighborhood or the gap
between the average list price and selling price is
less than five percent, you are probably in a seller’s
market. Be aware of interest rates as well. If rates
are low, then even in a seller’s market a buyer may
be able to afford the higher price of homes.
(20) Look for homes with a great view. A beautiful view
sells. No matter what location, if the view is terrific,
the home will be more marketable. And the better
the view, the higher the price. Consider two highrise
condo units with the same floor plan—the one on a
higher floor facing the ocean will sell for more than
the one on a lower floor facing the parking lot every
time. A townhome high on a hill in San Francisco, a
ski mountain retreat in Colorado, a beach house in
Malibu, or a Fifth Avenue co-op overlooking Central
Park in New York City all have hefty price tags that
will be even heftier tomorrow.