Posts

Showing posts from October, 2015

Real Cost of Housing

Image
A variety of factors have led to a shortage of rental units, especially single family homes, and as a result, rents have been steadily increasing nationwide. In most markets, it is considerably less to own than to rent.In some cases, the total house payment is less than the rent for a similar size and condition home which supports a purchase. However, when you factor in some of the financial benefits like principal reduction, appreciation and tax savings, the difference becomes even more dramatic.Let’s look at an example of a $250,000 home with 3.5% down payment and a 4.50% mortgage for 30 years. We’ll assume a 3% annual appreciation, 25% federal tax bracket, $1,200 annual maintenance and current rent of $2,100 a month.The total house payment with property taxes, insurance and mortgage insurance premium would be $1,834 a month. Once the principal reduction, appreciation, tax savings and maintenance have been considered, the net cost of housing is about $673 a month. It costs a te…

6 Reasons for Rentals

Image
Rental homes have several distinct advantages compared to alternative investments. These advantages coupled with the opportunity for a higher yield make it a clear choice for some investors.Most investments must be paid for in cash. Stocks can be purchased with 50% cash but if the value goes down, more cash has to be used to keep the margin at 50%. Rentals can readily be financed with only 20-25% down payment.Most loans made for business or investment purposes are at a floating interest rate compared to the prevalent fixed-rate mortgage on non-owner occupied real estate.Terms for investment loans if possible are generally six months to a year with a possible renewal but real estate commonly has long term loans up to 30 years.Real estate has a long-term history of appreciation.Real estate enjoys tax advantages like long-term capital gains treatment, cost recovery and tax deferred exchanges that are not available to many other types of investments.Single family homes and similar prop…

Your Best Investment

Image
According to a Federal Reserve report on Consumer Finances, homeowners' net worth is 36 times greater than that of renters. Building on that study, the National Association of REALTORS® believes that by the end of 2015, the factor will grow to 41 times greater.There can be several factors that contribute to this disparity but an important one is the forced savings that is achieved due to an amortized mortgage. A portion of the payment goes to the reduction of the principal balance of the mortgage which increases equity in the home.Appreciation is also a major contributor to homeowners’ equity. Homes, in most areas, have consistently increased in value over the long term and during the past four years have experienced solid growth. Many economists expect home prices to increase in the next five years.Let’s look at a scenario where a qualified buyer considers three different options to see what their investment would be in five years: purchase a certificate of deposit, invest i…

Oahu Market Stats September 2015

Image
The real estate market on Oahu continues to rise in many neighborhoods due to a weak inventory.  The average number of days on the market for an accepted offer remains under 3 weeks.  Median sales price for the month of September for a single family home was up, at $730,000.  Mortgage interest rates are still favorable for Buyers, but the new lender disclosure laws will be throwing us all curve ball.  Creative contract writing is order!  Working with a competent REALTOR can give Buyers an edge on getting their offers accepted.  Be sure to ask your agent what you as a Buyer can offer to a Seller to make your offer stand apart from competing offers.


The Cost of Co-Signing

Image
It seems fairly innocuous; a friend or family member wants you to co-sign on a loan because they don’t qualify. They assure that they’ll make the payments; they’re quite convincing and very appreciative. You don’t want to disappoint them and after all, it’s not like it’s going to cost you anything…is it?Think of it this way. They couldn’t get a loan unless you co-sign for them. If they don't make the payments, the lender is going to look to you to repay the loan plus late and collection fees. The lender may be able to sue you, file a lien on your home or garnish your wages. And it’s not just money that you could be losing, it could be your credit too. Co-signing a loan is a contingent liability that could affect your debt-to-income ratio and your ability to borrow. Co-signing is an obligation to repay the debt if the other signer is unable. You could be out the money and unable to recoup the loss because you don’t have control of the asset. The impact on your credit could t…