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The Cost of Waiting to Buy a Home

The National Association of Realtors (NAR) recently released their July edition of the Housing Affordability Index. The index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.

NAR looks at the monthly mortgage payment (principal & interest) which is determined by the median sales price and mortgage interest rate at the time. With that information, NAR calculates the income necessary for a family to qualify for that mortgage amount (based on a 25% qualifying ratio for monthly housing expense to gross monthly income and a 20% down payment).

Here is a graph of the income needed to buy a median priced home in the country over the last several years:

Qualifying income | Keeping Current Matters

And the income requirement has accelerated even more dramatically this year as prices have risen:

Qualifications | Keeping Current Matters

Bottom Line

Some buyers may be waiting to save up a larger down payment.  Others may be waiting for a promotion and more money. Just realize that, while you are waiting, the requirements are also changing.

 

Original Post from www.keepingcurrentmatters.com


 

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Is There More of a Role for Investors in a Real Estate Recovery?

It’s been a rough ride for homeowners and many investors since 2006 when it seemed that the good times would never end. But they did. The millions of foreclosures have done a lot to put a damper on the American Dream. The younger generations are no longer set on buying that first home. Many of them are living with their parents because they can’t even afford rent.

Investors have stepped up over the past six or more years, accounting annually for more than 30 percent of all home purchases. Some of that buying has been in blocks of hundreds or thousands of homes by major investors like the Blackstone Group. One recent headline tells us that the percentage of purchases by investors rose to 42 percent in one month. As long as the foreclosures keep coming there will be investor participation, but the competition for good houses has heated up. That competition is bringing higher prices, thus the media articles about a “market recovery.”

It’s weak, even if we can call it a recovery at all. There is still a large hole which the first time buyers used to fill. Just tracking prices isn’t working like it has in past markets. This is a new situation, and old statistical models may be misleading. The multiple strategies used by investors have all worked really well over the past few years:

• Wholesaling: Investors use location and negotiation skills to locate properties at deep discounts and then quickly sell them to other investors who wouldn’t have found them on their own. The sale can also be to a retail buyer, but there’s far less of that activity in current markets.
• Fix & Flip: The investor buys a distressed property and does renovation and repairs, many times selling them within three months or so to a rental property investor or possibly a retail customer.
• Rental Investors: These people buy homes with the long-term goal of renting them out for positive monthly cash flow over expenses, and a profit from appreciation at sale in the future.

All of these strategies are still working, but they’re mostly just contributing to the movement of Americans from homeownership to tenant status. This may be the future, at least for the next five to ten years until the economy has a chance to improve and unemployment decreases. It’s been a nice ride for real estate investors, and it’s not over. However, if we consider the dream of homeownership wounded but not dead, things will turn around at some point and buyers will be back. However, they may want to buy but still be hampered by their credit, lack of down payment cash, employment uncertainty, or student debt.

Even long-term rental property investors must have an exit strategy, and it’s in that exit strategy that investors may be able to help renters move back to ownership. The goals of both parties are aligned, as the buyers will be taking the home off the books of the investor when they want to liquidate the investment. Perhaps there’s a way to increase the number of potential buyers for that investment property by making it easier for them to buy.

Rent-to-own or lease-purchase arrangements have been around for a long time. A buyer who may not be ready to purchase but would like to do so can lease the home with an option to buy at some point in the future. They may need to build a down payment, or improve their credit. There are a number of benefits for the investor in this type of arrangement:

1. The tenant buyer really wants to own the home, so they’ll take better care of it.
2. The lease agreement may be structured with the tenant buyer paying some of the repairs and maintenance, definitely not part of a regular lease.
3. In many cases the tenant buyer will pay a higher rent, increasing cash flow.

A rental home investor with a plan to sell a home five to eight years in the future, perhaps to buy a more expensive rental or invest elsewhere, normally would just follow their plan and list it for sale. They’re already marketing the home for tenants, but now could take a different approach. How about helping a strapped tenant who wants to own but has a few hurdles to jump? Instead of just marketing for a tenant, changing the marketing approach to locating tenants who want to own could work for both sides.

The investor gets a three to five-year lease-purchase agreement providing the tenant with the option to buy on or before the lease expires. The timing of the expiration is when the investor wants to sell. The price is set to provide the desired profit for the investor. The tenant buyer has a plan with a due date, and they can begin to move toward ownership, taking great care of the home. It’s really no big change for the investor, just a different marketing approach. Should the tenant not exercise their option to buy, the investor is just fine, as they can list the home for sale as they would have anyway. It’s a win-win and may help bring back the dream.

Written by Dean Graziosi– New York Times Best Selling Author


 

 

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Why Real Estate Could Be a Better Investment than Stocks – Ya Think!

Before my added “Ya Think” emphasis, the title is the same as a title of an article this week over at Money,USNews.com. It’s not surprising to see an article like this now, as the China situation took the Dow Jones down in a dramatic way over the course of a week or so. If you want some historical perspective, there are some dates and Dow plunges historically:

• August 24, 2015: -588.47
• August 21, 2015: -530.94
• August 8, 2011: -634.76
• Six more 600 points or larger drops since 2000.

Yes, if you just bought and held for 15 years, you would have done well in stocks. Unfortunately, many people can’t simply drop a major chunk of change into stocks and just let it ride for that long. And, depending on when you buy, having to sell after a drop like these can be devastating to your savings and retirement.

So, that said, I’m not saying dump all of your stocks and buy real estate … particularly not now. However, the next time your stock broker advises you to “diversify,” don’t just do it with stocks. Let’s look at some of the points referenced in the linked article.

Actually, the article wasn’t really that positive about the advantages of investing in real estate. Things like the ease of placing stock trades and low cost of transactions were mentioned. Property taxes were mentioned as a negative, and they are to a point. The article’s title really wasn’t in my opinion supported very strongly by the content. So, let’s take a look at some differences between stocks and real estate as an investment asset class.

Inflation Hedge

Stocks are susceptible to inflation risk. Your return is whatever it is, including dividends. When inflation gets rowdy, it can take away major chunks of your investment gains in stocks. That’s not to say that real estate is inflation proof, but there are some logical reasons why it may be better.

Let’s think about what inflation really is. It is an increase in the cost of goods and services. So, what do you expect to happen to home prices when wood, tile, wiring, plumbing and other materials and labor costs increase? If it costs more to build, usually within a reasonable period of time it will cost more to buy. Your owned property value can actually increase during inflationary periods.

Interest Rate Increases

When interest rates rise, stocks and definitely bonds usually suffer. It costs companies more to borrow to expand and finance operations, so their profits are reduced. Bonds carry a fixed rate of return, so their value drops when interest rates increase.

If you own rental real estate with a fixed mortgage rate, interest rate increases don’t really bother you. In fact, they can help. If mortgage rates rise, more people must rent than buy. Rental demand increases and rents rise.

Taxes

Sure, you must pay property taxes if you own real estate. However, if you’re doing your job, you factor those into your purchase of rental property and the positive cash flow you project to receive. Sure, they can go up, but you may be able to offset that with rent increases.

One major difference is in using the IRS 1031 Exchange rule for growing your real estate portfolio. While the stock market investor will pay capital gains taxes in the year they sell a stock at a profit, real estate investors get a major break. Using this IRS rule, you can sell and roll the profits into another investment and forego paying capital gains. It’s complicated and the rules are strict, so an accountant needs to be involved.

I’m not trying to push anyone into real estate who is afraid of it or not suited for a landlord’s duties. But, there definitely are reasons for real estate as a diversification strategy.

 

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Real Estate Investing, It Isn’t Just for the Boys Anymore

When 51 year old stay-at-home mom and part time piano teacher Gena H. from Washington State woke her husband up at 1:15 AM and said “I want to be a real estate investor,” he patted her on the shoulder and said, “that’s nice dear.” In the morning he shared all the reasons he believed it could not work for her. Fast-forward a few years and Gena, who obviously didn’t listen to the husband she adores, is a successful and very profitable investor. She has in her words “dramatically changed the financial course for me and my entire family.”

Stories like these are coming to my attention at a rate like I’ve never seen in my well over 20 years of investing. I’ve been fortunate to watch countless people go from real estate observer to successful real estate investor. But never before has there been such a massive wave of women taking ownership of the household finances using real estate.

In watching this transition, I believe it’s due to a couple of primary factors. First, we all know that the real estate market peaked like never before around 2006, and then the bubble burst and the market crashed. It reminded me of flying down Space Mountain in Disneyland. However, after the bottom comes the inevitable shift in the market, when it begins trending back up as we are seeing now. This is truly a magical time for investors.

Second, I think we are heading into the years of more empowerment of women. I could be criticized for saying this, but I think it’s less about women’s liberation, as that was yesterday’s news. I see it as more that women are just losing any hesitation at all to do anything they want. I think it’s a very positive trend for our country. I watched my single Mom struggle to support my sister and me growing up, so I’m always cheering for the ladies. I think we are entering a whole new era of advancing equality. But that’s for another story.

Jen G., a single Mom, was working in an accounting office with no windows and too little pay each month to support her and her son. Frustrated, stressed and wanting a new path in life, she decided to reinvent herself through real estate investing. Friends and family told her real estate investing was for people with money and experience. Some even expressed resentment and actively discouraged her. Recently, Jen called to tell me: “Just six months after starting, I got to walk into my office and tell my boss I no longer needed her services!” Jen quit her job and has done more than 185 real estate transactions so far and feels she is being the Mom she always wanted to be.

Tammy R. lives in a crazy fast moving market in CA. This is a market where even seasoned investors are afraid to take the plunge. However, this determined Mom of four, who was homeschooling her children when she started investing, refused to yield to her fears. She didn’t listen to her husband who said “it won’t work for you.” Like Jen, she didn’t have a ton of money to start, but researched a method called “wholesaling.” Wholesaling is matching up monied investors with good deals, and making money in the middle. On one transaction alone she made more then she did the prior two years, and she is currently working on her 23rd deal. “You just can’t let the naysayers spoil your dreams” she said when asked about the secret of her success.

Whether you’re in a strongly rebounding large urban market like Tammy, a more rural and smaller city in Alabama that’s coming back at a slower pace like Jen, or somewhere in the middle like Gena in Washington State, it doesn’t matter. The current state of all of these markets is opening up endless opportunities for investors to gain the knowledge to profit and who aren’t afraid to go for it.

Real estate is my life, and with over 20 years of non-stop investing I’ve personally experienced that there is always a profitable strategy that fits the current market cycle. However, the massive spike in real estate, followed by the inevitable and dramatic crash, is setting up a solid rebound. I truly believe this is the greatest time for everyone who would like to secure a better future to get educated, learn from those who are doing it, and jump into real estate investing.

I’m currently doing 30 to 50 deals every month all around the country, in 9 states actually. I’m working with women like Gena, Jen and Tammy, as well as a slew of others who are crushing todays shifting real estate market rather then complaining about it.

Maybe real estate investing is cooler and more possible then you think. All I can say is that the boys better step up.

Follow Dean Graziosi on Twitter: www.twitter.com/deangraziosi

 


 

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5 Trends That Will Move Real Estate Markets This Week!!

Enjoy Labor Day … because these five trends may rock the real estate world the rest of the week:

 

  1. Who’s remodeling? See profits at HD Supply, Restoration Hardware.
  1. Homebuilding profitable? Watch Hovnanian earnings, out Wednesday.
  1. Look at real estate slice of Producer Price Index.
  1. Are rates moving? See Freddie Mac mortgage survey, out Thursday.
  1. Who’s borrowing? Watch mortgage bankers’ application survey, out Wednesday.

 

            Source: Jonathan Lansner – writer OC Journal

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Dita Von Teese, queen of burlesque from Irvine, buys Tudor hideaway with ‘secret garden’

 

Burlesque star and onetime Playboy cover girl Dita Von Teese – Heather Sweet when she was growing up in Irvine – has bought a Tudor Revival-style house in Los Feliz for $2.83 million.

Built in 1927, the 3,200-square-foot retreat boasts a round castle turret, Gothic arches and center medallions encircling feudal fixtures. The property, on a third of an acre in a “Sherwood Forest” setting, includes a “secret garden,” according to listing agent Peter Reyes of Keller Williams Realty in Los Feliz, near Hollywood.

The four-bedroom house has slate and hardwood floors. A dark-bottom swimming pool and detached pool house with a wet bar and dry sauna fill out the grounds.

Real estate website Trulia recently broke news of the sale, which closed in late July. The home was listed in May at $2.99 million.

Von Teese, 42, whose family moved from Michigan to Irvine when she was 12 years old, also lived in Costa Mesa and Huntington Beach. She left Orange County in 2001, became a Playboy cover girl the following year and went on to marry and divorce heavy metal rocker Marilyn Manson.

Her recent, over-the-top “Burlesque: Strip Strip Hooray!” national tour showcased routines inspired by old-fashioned glamour, a bathtub-sized martini glass with 250,000 Swarovski crystals, a blinged-out mechanical bull, her hallmark corsets and custom stilettos by Christian Louboutin.

She also teamed up with the designer to release a line of lingerie.

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Source:

 Image – Dita Von Teese, a burlesque star who grew up in Orange County, has bought a 3,700-square-foot, Tudor Revival-style house in Los Feliz.
COMPOSITE BY MARILYN KALFUS; INSET: DANIELLE BEDICS; TRULIA
Leslie Sargent Eskildsen is an OC real estate agent. leslieeskildsen.com.  http://www.ocregister.com/lansner/irvine-679168-teese-house.html
Marylin Kalfus OC Journal Staff Writer

 


 

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Renters Insurance

How Renters Insurance Will Help Cover The Loss of Your Valuables

Red Rock Management (www.RedRockManagementLV.com)  encourages all tenants to purchase renter’s insurance.  Many tenant’s inquire as to why we ask them to purchase rental insurance.  Below is an outline by Farmers Insurance as to the importance of having renter’s insurance.

HOW RENTERS INSURANCE WILL HELP COVER YOUR VALUABLES

Imagine a moment you’ve just returned home from a long day at work to find there’s been a fire. Everything you owned has been destroyed: your flat-screen TV, computer, furniture, books, game consoles, CDs, jewelry, collectibles and clothing. Where will you stay until your home is renovated? Who will pay to replace all your belongings? Not your landlord.

A Renters insurance policy can be the answer. It provides coverage to help you to replace your lost or damage items. If you suffer a covered loss, we’ll reimburse you for your lost or damaged items. And if the loss makes your home uninhabitable, we’ll also pay for the additional living costs for hotel, meals and related expenses.

Renters policies are affordable, generally ranging from $15-$25 each month. For less than a dollar a day, you can have valuable insurance coverage!

BENEFITS

– Personal property coverage

– Personal liability coverage

– Additional living expenses

OPTIONAL COVERAGES

– Personal articles floater

– Jewelry, furs, fine arts

 

 


 

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House with cash

Buying with cash saves cash – and time

An article by Real Estate Agent Leslie Sargent Eskildsen, discusses the differences of Buying a house with cash or taking out a loan.

She writes, “Just recently, a reader asked me about the difference between buying a house with cash and buying a house with a home loan. That’s a great question!

Here’s a rundown of the differences.

Buying a house with cash saves you money. You don’t have to pay for an appraisal. That doesn’t mean you can’t or shouldn’t pay for an appraisal, you just don’t have to.

Buyers using a home loan have to pay for an appraisal. The lender requires an unbiased, licensed appraiser to give a thoroughly researched and documented report on the value of the home so the lender is confident you’re paying the right price and that they are making a sound investment.

A home buyer paying cash also saves on other lender related costs including a credit report, loan origination fee, flood certification, tax service fee (the lender has to be aware of any back taxes owed) lender required title insurance and any points a borrower chooses to pay to bring down the interest rate on the money borrowed.

In addition, a cash buyer is not required to purchase home owner’s insurance.

When you get a home loan, the lender requires evidence of insurance, and you pay for a full year up front.

I’d never recommend not buying home owner’s insurance. However, when you’re buying a house with cash, you can work it out directly with your insurance carrier as to the frequency of payments.

When you are buying with cash, you also save on escrow fees including the loan tie-in fee, the loan documentation prep fee, and the notary fees (you’re not signing anything that needs to be notarized).

The more subtle aspects of buying with cash include the need to prove you have the cash up front with your offer. This means you need to submit, up front, bank statements showing sufficient funds to cover the price.

If you are flush with tons of cash, you may want to keep a bank account that only has a balance large enough to cover the cost of the house and your share of the escrow fee and a processing fee.

You have no need to show the seller how much you have overall.

You get to keep your financial status a secret, as opposed to a buyer getting a home loan. Those who buy with a loan have to provide full financial disclosure to the lender to qualify for the loan.

There’s much less paperwork required when buying with cash. You can also close escrow much more quickly. You do not have to budget time for the appraisal review, underwriting review, management review, and all the time to prepare and review loan documents.

There’s also the advantage of representing less risk to a home seller. If you show the seller the money up front, and if your offer is a figure that is acceptable to the seller, you will probably win out over a buyer who needs a loan. Cash is much easier and less risky.”

 

Source: OC Journal – leslieeskildsen.com.

 


 

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Looking to maximize your rental income without spending a lot of money out-of-pocket?

Looking to maximize your rental income without spending a lot of money out-of-pocket? Tenants don’t want to cook in a dark, cramped, outdated space. Increase the wow-factor of your property by updating your kitchen. Stainless steel appliances are nice, but if you’re remodeling on a budget, read on for some easy, low-budget ways to improve your kitchen. Plus, if you decide to sell in the next 5-10 years, a mid-range kitchen remodel  can give you up to a 70% return on your investment, according to Remodeling Magazine’s 2015 Cost vs. Value Report

Paint Cabinets White

Are your kitchen cabinets a little beat up? Do you have wood cabinets that look dated and make the room gloomy? You can easily upgrade your kitchen by painting your cabinets white. White cabinets work with all types of design styles, so whether your tenant’s style leans more toward rustic or modern, they’ll be able to make their belongings fit nicely. White cabinets also give you a neutral palette to try out an array of stylish backsplashes or even a bold color for a statement wall.

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Via Modernize.com

 

Add Interesting Lighting

Lighting is an inexpensive way to add some real style to your kitchen. Pendant lamps or even a chandelier are great tools for integrating your cooking and eating space–whether it’s a breakfast nook or an adjacent dining room. You can also play with scale to make a cavernous space feel more intimate or a small space more cozy and welcoming.

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Via Modernize.com

If you have a kitchen that tends to get very hot, consider adding a light fixture with a ceiling fan. Your tenants will appreciate it in the warm summer months.

 

Maximize Storage Space

Even if you have a small kitchen, you’ll be able to meet the needs of your tenants with some smart storage solutions.,. Install multiple shelf units within cabinets to double and sometimes triple the storage space. In the area under the sink–always tight because of plumbing–install some handy door racks inside the cabinet to keep supplies organized. You can also make the most of those faux drawers (typically found below the sink) by converting them to tilting drawers that hold sponges and other small cleaning supplies. If you’re working with limited space for dishes, utensils, spices or small cooking accessories, look underneath the cabinets. There are ample options for installing racks with hooks to hang coffee mugs or utensils; magnetic strips for cutlery sets, dish drying racks and even spice shelves. The space underneath cabinets can provide an incredible amount of unexpected storage space, and in a neat and tidy manner.

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Via Modernize.com

 

Utilize a Non-Traditional Island

If you have the space, consider adding an island to your kitchen. The island will provide valuable counter space for preparing meals and can serve as a dining room table for small family dinners or as a serving buffet during parties. Depending on the type of island you select, you may also be able to get some extra storage space out of it. You don’t have to spend a lot of money of a factory produced island (that may or may not match your cabinets). Instead, consider non-traditional islands like a repurposed dresser or bookshelves. Here are some great DIY inspirations for kitchen islands. Whatever you end up using, just make sure to fasten the island to the floor to keep the surface stable.

 

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Source : Bryn Huntpalmer, Editor of Modernize.com Via Modernize.com


 

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Real Estate Finance

Is property management affordable for single-family rental owners?

Not only is property management affordable, using a property manager can actually increase your property’s overall profitability. Most property managers charge a small percentage of your monthly rent in exchange for comprehensive services that range from finding and screening tenants, to handling emergency maintenance, to keeping the books and preparing year-end taxes.

Source – All Property Management

 


 

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