Tuesday, August 27, 2013

Find the "Right" Agent Before the "Right" Home

What Buyers Want.pngIt’s a common practice for buyers to make a list of what they want in a home during the search process and to explain it to their agent. However, maybe the first list they should make would have the skills they want their agent to have.

The Profile of Home Buyers and Sellers identifies what buyers want most from their agents and as you’d expect, help with finding the right home was ranked highest most often. While it is important, it may not be the most unique of the desired area of expertise.

Equally essential to the success of the transaction are the combination of help with price and terms negotiations and assistance with the paperwork, comparable sales, qualifying and financing.

To summarize the responses in the survey, Buyers want help from their agents with two things: to find the right home and to get it at the right price and terms. Some agents are actually better equipped with tools and acquired knowledge to assist buyers with financial advice and negotiations.

Since an owner’s cost of housing is dependent on the price paid for the home and financing, a real estate professional skilled in these specialized areas can be invaluable in finding the “right” home. An agent’s experience and connections to allied professionals and service providers is irreplaceable.

Ask the agent representing you to specifically list the tools and talent they have to address these areas.

Thursday, August 22, 2013

A Home is More Than an Address

iStock_000006174018XSmall.jpgA home is a place to call your own, raise your family, share with your friends and feel safe and secure. It is also one of the largest investments most people have.

Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. It has been described as using other people’s money to increase your yield and it applies to homeowners and investors alike. Positive leverage causes the yield to increase as the loan-to-value increases. 

Even a modest amount of appreciation combined with the amortization of a loan can cause a substantial rate of return on the down payment and closing costs.

Homes build equity as the price goes up due to appreciation and the unpaid balance goes down due to amortization. 

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The example above indicates the yield on a home considering 3% acquisition costs on the home with a 4.5% mortgage rate and the resulting equity at the end of five years. The different down payments will affect the yield based on the leverage effect. 

Whether you rent or buy the home you live in, you pay for what you occupy. The question a person is faced with is whether they are going to buy it for themselves or their landlord. Take a look at the cost of Renting vs. Owning.

Monday, August 12, 2013

Get Regular Check-ups

Following his heart surgery last week, after an issue was discovered during his annual physical, President George W. Bush encouraged everyone to get regular check-ups. annual advisory.png

Another important checkup that should be done on a regular basis and can be just as beneficial for your finances is an annual homeowner advisory. Why would you treat your investment in your home with less care than you treat your car or even your HVAC system?

Consider investigating the following:

• Know the value of your home by obtaining a list of comparable sales in your immediate area as well as what is currently on the market for sale.

• Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes?

• Even if you’ve refinanced in the last two years, can you save money and recapture the cost of refinancing in the time you plan to remain in your home?

• Have you considered reducing your mortgage debt with low-earning cash reserves that will not be needed in the near future?

• Have you considered investing in rental homes in good neighborhoods to increase your yields and avoid the volatility of the stock market?

• Recommendations of repairmen and other service providers from a trusted source who deals with them more frequently than you do.

Our goal is to create a lifelong relationship to help you be better homeowners. We want to be your “go to” person whenever you have a real estate question. We want to help you not only when you buy and sell but all of the years in between.

We want to provide good, consumer-based information about homeownership on a regular basis through email and social networking. If it benefits you by helping you be a better homeowner, hopefully, you’ll consider us your real estate professional for life.

Anytime you or your friends need help, please call. Knowing where to get the answer is just as important as knowing the answer. If you’d like information on any of the items we suggested, please let us know.

Tuesday, August 6, 2013

Does anybody really know what they want?

Do you "want" to be a millionaire?

I've been hosting some "focus groups" -- small 3-4 person groups with the "focus" being on becoming better Realtors.  The first question I pose to the group is simply, "what is it that you want in life?"  In other words, "what are your life aspirations?"

While this is the most important first step toward personal and professional growth, it is interesting to note that most people haven't really thought about it.  I mean, really, really thought about it!  And yet, you must know what you want in order to get it.

I think that most of us think about something we want, do what it takes to get it, then forget to want something else!  Thus, we reach this "status quo" level that begins to falter and not deliver what we thought we'd get.  (Uh-oh, now you're thinking "Hmmmm......the old bird is getting deep here.")  Maybe I am.  But I realized it's time for ME to rethink what I want so that I can move on to the next level.

As I've discussed "life aspirations" with these groups, I began to realize that everyone wants "financial independence," but can't really define it . . . or the definitions vary considerably.  So, let me share what I learned it to be from a man whose name I can't remember; however, his first name was Ken and he was one of the owners of the ERA Regional Office in Houston in 1980, partners with Dale Climer.  That's where I first met Helen Perry who now owns a real estate school.  (Helen, what was Ken's last name???)  You may remember that I opened an ERA franchise in 1981 . . . as did Jim Keenan, Joe Rothchild, Patty McCracken, and several other "old" friends who are still around in the business today!

But I'm digressing again . . . so here's how Ken simply defined "financial independence:"  have enough money in the bank in cash to pay for 6 months' expenses without earning a nickel.  Ok, sounds simple enough, so I made a goal out of it later in life.  The hard part is knowing how much your monthly expenses actually are!  (Do you?  Are they written down?  Do you live by what you have, or what you budget?)  There's 3 questions for you.  I realized, in my focus group, that this is going to take some work.

I will say that I operate my life in "financial independence."  And Ken's model got tested a few years ago after Hurricane Ike.  Remember when houses simply couldn't sell because of all the hurricane damage?  My 6 months' expenses were spent down to month 5!  Then, through hard work and determination, income began to grow again and the stockpile was replenished.  I call this stockpile my nut . . . and like a squirrel, I store my nuts for the winter months!

I also found that many (if not most) people want "to get rich."  But unless that is dollarized and defined, it just won't happen.  Wanting money won't get it.  Notice that "financial independence" requires a very specific number (which varies for everyone).

To "get rich," you must have a vision of what those riches will do for you.  Buy a house?  Car?  Pay for college for your kids?  How much exactly is that?  

What is a "millionaire?"  You don't know, yet you want to be one?

What are YOUR life aspirations?  What do you REALLY want?

Monday, August 5, 2013

Where Is It Invested?

iStock_000007485701XSmall.jpgYou’ve saved for a rainy day or retirement. Congratulations but don’t get too comfortable yet; where is it invested? It’s estimated that over 25% of Americans have their long-term savings in cash instead of investments like stocks, bonds or real estate.

The memories of the financial crisis of 2008 are recent enough to understand why some people may want to avoid the stock market and real estate. Even though Wall Street and housing have rebounded considerably, uncertain investors are sitting on their cash. However, trying to avoid a bad decision can have serious costs too.

If your money is not earning at least at the current inflation rate, you’re losing the purchasing power of your dollars. Bankrate.com estimates the average money-market deposit yields 0.11% and the average five-year certificate of deposit currently yields 0.78%.

Rents are continuing to rise and there is a shortage of good, affordable housing. Single family homes have a significant advantage over many other types of investments. They have high loan-to-value mortgages available at fixed interest rates for long-terms on appreciating assets with distinct tax advantages.

The cash flows are considered to be one of the most attractive features of rental properties. Some investors think of it as a growth stock that pays substantial dividends. In the example shown below, a $125,000 rental with an 80% loan-to-value mortgage at 5% that rents for $1,250 per month, has a positive cash flow before taxes of $3,000 a year.

The rate of return on rental property can be substantially higher than other investments while allowing the investor control that isn’t available in alternatives.

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