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Showing posts from February, 2014

Making Room in Your Rooms

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The more things you have, the more you have to take care of.  And in this case, the more that you have to store that gets in the way of finding the things that you actually use.  Periodically, you need to go through every closet, drawer, cabinet and storage area to get rid of the things that are just taking up space in your home and your life.Every item requires the decision to retain or remove.  Consider these questions as you examine each item: • When was the last time you used it?
• Do you believe you’ll use it again?
• Is there a sentimental reason to keep it? You have four options for the things that you’re not going to keep.  If you know someone who needs it or will appreciate it, you can give it to them.  You can sell it in a garage sale or on Craig’s List.  You can donate it to a charity and receive a tax deduction or you can discard it to the trash. Start with your closet. If you haven’t worn something in five years, get rid of it.  Then, go through the things again and i…

Rate/Payment Relationship

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A ½% increase in interest rate may not sound like much but it is roughly equivalent to a 5% increase in price.  It becomes obvious when you compare the payments.If you financed 100% of the cost of a $250,000 home at 4.5% interest for 30 years, the payment would be $1,266.71 per month.  If the mortgage rate went up to 5%, the payment would be $1,342.05.  If the home increased 5% in value, the $262,250 loan at the lower 4.5% rate would have payments of $1,330.05. The two payments are close enough to justify the statement that a ½% change in interest is approximately equal to 5% change in price. Each time interest rates go up, fewer people can qualify to buy a seller’s home.  The mortgage rules that went into effect this year require buyers to meet specific payment to income ratios.  As demand picks up for the seasonal market, most experts expect rates to increase. Buyers will be doubly challenged in the current market because prices are rising (NAR reports 11% last year) along with the …

Rent or Buy - the cost is going up

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Whether you continue to rent or decide to buy a home, according to recent Zillow 2014 housing projections, the cost is going up.  Zillow projects home prices to increase nationally by 3%, mortgages to rise to 5% interest rate by the end of the year and rents to go up by 2.5% on average.If it will cost a person more whether they rent or buy, the conclusion can be made that one way or the other, they will pay for the house they occupy.  The question will be whether they buy it for themselves or their landlord? Will they benefit from the equity build-up and the appreciation? The following analysis looks at a $200,000 home that can be purchased with a 30 year FHA mortgage at 4.3%.  The assumption uses 3% appreciation and tenant currently paying $1,750 a month in rent. The house payment, principal, interest, taxes and insurance would be about $1,609 a month.  However, once you consider the benefits of the principal reduction each month, the appreciation and the tax savings and the increase…

Find a Better Return

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A certificate of deposit will generate a cash flow based on the interest rate that it pays which is the only way it generates a return for the investor.An investment in a stock that doesn’t pay dividends, would need to be worth more than you paid for it to earn a profit.  On the other hand, a stock that paid dividends could make the investor a profit even if it sold for the same price that he paid for it. Investors can profit four different ways with an investment in rental real estate. 1. Cash flows that result from having a surplus after collecting the rent and paying the expenses. 2. Equity build-up results from a portion of each monthly payment reducing the unpaid balance. 3. Tax benefits can result from the depreciation allowed on the property and the preferential long-term capital gains tax rate. 4. Appreciation benefits the investor when the value of the property increases. The most conservative investors in real estate make decisions to purchase a rental property based on its …