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Showing posts from October, 2014

Relax...There's an Alternative

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Is the stock market keeping you up at night?  Are you consuming more antacids than ever before?  Are the ups and downs causing more stress than you want or need?  There is a simple alternative in rental real estate.Single family homes for rental purposes offer an excellent rate of return in an investment that most people understand better than other investments.  The concept is simple: stay with predominantly owner-occupied homes in a slightly below average price range.  In most areas, tenants are easy to find and they’ll usually stay two to three years or more. For the person who doesn’t want to be bothered with calls from tenants, professional management is available and commonly won’t dramatically affect the rate of return.  Managers can achieve economies of scale that individuals can’t due to managing multiple properties and having good connections with the best workmen. Unlike most commercial property, single family homes are much more liquid because of the higher demand f…

Save Interest, Build Equity & Shorten the Term

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If you invest in a savings account, you’ll make less than 1% and would have to pay income tax on the earnings. On the other hand, contribute something extra to your house payment and you’ll earn at the mortgage interest rate which is certain to be more than you are earning in the bank. Making additional principal contributions on your mortgage will save interest, build equity and shorten the term. An extra $100 a month in the example shown will save thousands in interest and shorten the term of the mortgage as well. Reducing your cost of housing is another way to improve the investment in your home. Becoming debt free is a worthy goal that is achieved with discipline and good decisions. Suggestions like this are part of my commitment to help people be better homeowners when they buy, sell and all the years in between. Check out what would happen if you were to make additional payments on your mortgage.

Busto Family In Action

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Busto's are having some fun on a rainy day on Honolulu.

Enjoy Your Improvements and Profit by Them

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Homeowners can raise the basis or cost in their home by money spent on capital improvements. The benefit is that it will lower their gain and may save them taxes when they sell their home.Improvements must add value to your home, prolong its useful life or adapt it to new uses. Repairs are routine in nature to maintain the value and keep the property in an ordinary, operating condition. Additions of decks, pools, fences and landscaping add value to a home as well as new floor covering, counter-tops and other updates. Replacing a roof, appliances or heating and cooling systems would be considered to extend the useful life of the home. Completing an unfinished basement or converting a garage to living space are common examples of adapting a portion of the home to a new use. Other items that can raise the basis in your home are special assessments for local improvements like sidewalks or curbs and money spent to restore damage from casualty losses not covered by insurance. Here’s …

Opportunity Costs

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Sometimes, there are costs associated with not taking a particular action.  If a person left their money in a certificate of deposit earning 2% when they could have made an investment that earned 8%, the difference is the opportunity costs associated to not taking action.If a couple has a down payment and good credit, locking in a low interest rate mortgage for 30 years could easily provide their lowest cost of housing.  If that couple waits three years to purchase a home, the price would probably be higher as would the mortgage rate. However, assuming the price and interest rate remained constant, look at what the opportunity costs might be compared to doing nothing. If their money was invested in a certificate of deposit at 2.00%, in two years their $8,750 would have grown to $9,104.  They would have earned $354 and had to pay ordinary income tax on the interest. If their money was invested in the stock market that had increased 7%, in two years they would have a profit of $1,…