|Real Estate Information|
Dont Overpay for a House, Even in Todays Market
If theres one thing American investors love, its an over-inflated market. Which is why they keep buying houses and new ones keep coming onto the market. According to the latest data, housing starts rose an annualized 3.4% in September, matching a 17-year high. Whoo-ha! Go, baby go.
I wonder if the people buying these houses, for ever-rising prices, are the same people who couldnt get enough Amazon.com stock at $100 or Lucent shares for $75 Having been burned in the stock market, I guess they decided to re-invest what was left in their homes. Are we in a housing bubble I dont know, but I suspect that we are, at least in some areas of the country.
Dont misunderstand me, now. I own a home, and I think home ownership is one of the great freedoms we enjoy in this country. I get nervous about the people who are pulling all the equity out of their homes with new mortgages. I suspect that most of these people are spending the equity, not investing it. What theyre left with is a larger mortgage, and a bunch of worthless Chinese made goods.
The current low-interest rate environment is a once-in-a-lifetime chance to lock in a cheap 30-year mortgage on your home. If you refinance the balance of your current mortgage, youve won. If you refinance, and max out on your equity, youre probably hurting yourself. You might say that by refinancing the equity in your home, youre just cashing in on your homes rise in value. Well, not exactly.
What youre really doing is collateralizing the portion of the house that you own to get a cash loan, with the intention of paying back the loan at a later date. Youve really transferred ownership of the equity in your house to your lender, not cashed it out. If you want to cash out your equity, you have to sell your house, plain and simple.
For those who are buying new homes, the low interest environment is a double-edged sword. On the one hand, you can get a tremendous rate on a 30-year mortgage, the likes of which you see once in a lifetime. On the other hand, because we live in a world where the monthly payment is all that matters, lower interest rate mean higher home prices. The monthly payment stays the same, but now youve got a much higher mortgage balance, which could turn around to bite you in the future.
The dangers of refinancing the equity out of your home are readily apparent, but why shouldnt you buy a home in the current environment
Im not saying you shouldnt. What Im saying is you have to be careful. Most real estate professionals understand that the monthly payment matters, not the price of the house, when selling a house. Therefore, the lower interest rates fall, the more money can be charged for a house. If youre a home buyer, with a set amount of money for a downpayment, the price of the house will determine how much equity you start with. And, it determines whether you get a conventional mortgage, with 20% down, or some other form with less downpayment. That equity percentage will determine whether youll be paying for the great rip-off known as Private Mortgage Insurance PMI. Trust me, its just another monthly payout that goes down a giant rat-hole. Theres no value in PMI, and you dont want to pay it.
For the sake of argument, lets assume that you wont be paying any PMI. Now, lets compare two neighbors, with identical houses, who have the same monthly payments on thirty year mortgages. The first neighbor has a $100,000 mortgage at 10% interest, the second has a $146,000 mortgage at 6%. You may think this is extreme, but I can tell you that this is what has happened in my neighborhood over the last 5-7 years. The type of house Im living in retailed for under $100,000 in 1999, and retails now in the $130,000s.
Back to our example. Both of our neighbors are paying about $875 per month on their mortgage. Now let’s suppose that both of them decide to pay extra on their mortgages, upping their payments to $1,100 per month. Both neighbors are reducing their principal balances by $225 more per month, and here’s where the first neighbor has the advantage. The balance on the $100,000 mortgage goes down much quicker than the $146,000 mortgage, such that while the first neighbor is paying more in interest every month than the second neighbor, by sometime in the seventh year, neighbor one is actually paying less in total interest. Neighbor one will pay his house off in a little over 14 years, while neighbor two will take about 18 years to pay off.
In this example, we don’t even take into account the possibility that neighbor one could refinance the balance on his mortgage when interest rates decline. This would lower his required payment, and allow him to pay off his house even faster. In the meantime, the “market value” of his house has risen to about what neighbor two paid $146,000. When neighbor one decides to sell his house, he’ll walk away with a lot more cash.
Obviously, this is a simplified example, but one that has been occurring over and over again in the last few years. I know that it’s expensive right now to buy a house, no matter where you go. What do you do in this situation I recommend looking for, and buying, a home that needs some work. You should look for houses that are selling at about 80% of the average market value in a neighborhood. These houses will generally need only cosmetic work, and maybe a few minor repairs, but you’ll save on the price of the house and have extra equity right off the bat. Stay away from houses that need plumbing or electrical work, unless you know someone that will fix it for free. Those fixes cost big bucks, and will eat up much of the savings on the price of the house.
Buy the house, make the cosmetic changes, then have it re-appraised. You’ll be surprised at how much the “value” of the house has gone up. I put value in quotes because the only real way to judge the value of a house is to sell it. An appraisal is simply an estimate of value. This will also help you get rid of the PMI, if you didn’t have the 20% downpayment, because once the balance of your mortgage falls below 80% of your appraised value, you can petition to get rid of the PMI. Houses can be investments, and like any investment it takes a work to find good value. But it can be done.
Writing a Press Release
When dealing with "this-just-in" type information, it is important to understand how to write a head-turning press release. A press release must contain substantial information that you consider to be newsworthy and substantial. Relate the news to the audience. Spell out for them WHY it is newsworthy and why they should read on. First describe your news, and THEN tell who said it, etc. Remember that the first ten words in your press release are the attention-getters, thus should be effective. Use what journalists refer to as plain-style language, not fancy words or lots of adjectives. Stick to the facts; avoid fluff. Provide plenty of contact information the name, phone numbers, fax etc. for the person with the most information about the story to make it as easy as possible for the media to do their job!
Moving On: Powerful Tips For Selling Your Home
Maybe youre moving to a larger home to accommodate a growing family, relocating for a new career opportunity, or purchasing a townhouse for retirement.Whatever the reason for the move, youll need to take the necessary steps to sell your home for the best possible price, within a reasonable amount of time.Where do you begin
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If you have been a long time subscriber to this newsletter you have read about the determinates of success before. If you are new, hold on to your hat because this is some powerful stuff.
Finding and Managing Quality Reciprocal Links: A Tutorial for The Newbie
All of us want to increase traffic to our web sites. It helps our search engine rankings, and is a very cost-effective way to provide us with potential new customers. One of the best, and certainly least expensive, ways to do that is by exchanging links with sites similar to our own, or that contain content our own visitors are likely to find interesting and useful. It is important to restrict our exchanges to such sites because if we indiscriminately exchange with everybody and anybody we become what is known as a “link farm” and wind up being banned by the search engines. No one wants to be banned by the search engines, so this article will discuss how to find relevant sites with whom to exchange links, and how to keep track of them after you have exchanged the links. Even though there are software programs that will do most if not all of this for you, they have various flaws and inadequacies. If you are one of those people who prefer the personal touch, this article is for you!
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Avoiding A Bad Investment Is Easier Than You Might Think
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Yahoo!/Overture Site Match: A License To Steal
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How Do I Implement The Lease Purchase Plan
Well, as we have discussed in previous newsletters first you have to set up goals for yourself, both long term and short term. Don’t forget these goals define how your business is run. They will determine what you do on a daily, weekly and monthly basis. The best way to do this is to picture yourself a year down the road. Close your eyes and get a mental picture of where you want to be, what you want to have, how you want to look, then open your eyes and write all that down on paper or speak into a voice recorder.
7 Essentinal Resources for Small Business
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Juggling The Day With A Deal
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Profits With Rental Properties
So you are interesting in becoming a landlord Investing in rental properties can be an exciting and very profitable business. Not only can real estate provide current income through rental property but it also can increase your personal wealth or networth. Make no mistake, this is not a sure thing to easy money and investing in real estate is not for everyone. There are risks as with any business or investment but with careful research and the help of a real estate professional you can find the right property in the right location for maximum return on your investment.
5 Tips to Locating Highly Competitive Wholesale Products - PART 3
How to Choose the Proper Entity for Your Business
First, let me state that Im not an attorney and the rest of this article is just based on my experiences so Id advise you to contact John Hyre at www.realestatetaxlaw.com to get some solid, specific advice on your particular situation.
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The Truth About 1-900 Numbers
900 numbers have been heavily advertised over the last few years as a great way to make money. Everybody from Dionne Warwick to Don Lapre are getting in on the pay per call action
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Three Important Litter Box Considerations
There are three important litter box considerations toaccount for whether youre a new kitten owner, or someonewho has had a cat for a while. If kitty isnt happy withany or all three of these, you may find shell starturinating outside the box.
Parenting and Running a Home-Based Business
An Ann Landers column "Parenthood is not a job for the weak at heart" caught my interest.
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