Monthly Archives: November 2017

The Benefits of Home Ownership

Real Estate and Wealth Creation

Like most things, there are costs and benefits, the yin and the yang, the good and the bad…well, I think you get the point.  So lets look at the benefits of home ownership vs. renting.  This isn’t meant to be comprehensive in any way, but hopefully it will provide some ground work if you are vacillating between buying a home or just renting FOR.THE.REST.OF.YOUR.LIFE!!

Stability

There are a couple of angles to this argument.  First, if you finance your home with a 30-year fixed-rate mortgage, you have stability with regard to your payment.  It will still vary a little as property taxes and homeowners insurance rise, but the biggest part of your payment will remain the same for 30 years – of course, it’s a rarity that people keep a house for that long (and for wealth creation purposes, it may not be the best strategy – check this out) or their mortgage since people have been known to refinance to take cash out of their house to use for a variety of things.  Regardless, if you keep your house and your mortgage for 30 years, you’re principal and interest payment won’t change.  You can’t say the same about your rent; as prices go up, you better believe that the rent your landlord charges you will also increase.

A second element of stability is that you control where you live.  If you own your home, you can live there forever and decorate it however you want and redecorate it to your changing tastes whenever you want.  Conversely, if you rent a home, you may be forced to move if the landlord decides it’s time to sell – for any number of reasons.  If you were lucky enough to have a landlord who didn’t increase your rent much of the several years that you lived there because he liked you and appreciated your on-time payments, you will now likely experience a large increase in your rent payment if you move into a similar home.

Wealth Creation

I talk a lot about this; one reason is because the savings rate in the US is very low compared to other 1st world countries.  We need to do a much better job of saving and, better yet, investing.  The 2nd reason is because while there are lots of great investments, real estate is probably the best.  More millionaires have been made from real estate than any other single form of investing.  With real estate, you get the ability to use leverage.  There are also great tax benefits that help you keep more of your money for investing.  I’ve got a 6-part video series on my website about real estate investing; each video is from 5- 12ish minutes – check them out and you’ll get a clearer picture of why I’m a fan – you’ll find them in the drop down menu.  The bottom line is that when you own real estate, with few exceptions, you will create wealth for yourself.

If you rent, you get to help someone else create wealth.  They enjoy all the benefits of wealth creation that real estate provides.  What is your plan for retirement?  Do you have one?  Many people, dare I say most people don’t.  The right kind of real estate can help you grow your assets while you are working and don’t need income from your rental properties.  When you want to retire, you can switch your real estate to more income-oriented properties.  Check out the video series for some great ideas and strategies on real estate investing.

Tax Benefits

I don’t think people should ever make a decision based solely on tax benefits but they are nice to have.  Buy a home for the stability and the wealth creation capabilities it offers, but enjoy the tax benefits of being able to write off your mortgage interest and your property taxes.  Sometimes the government even lets us write off the mortgage insurance.  If you own an investment property, probably not the first home you will buy, then you get big tax deductions like depreciation and you get to defer your capital gains via a 1031 exchange.  Just watch the video series and you’ll get it all there.

It’s Your Home

In the end, when you own a home, you can do whatever you want with for however long you want to live there.  My parents owned the home I grew up in for 25 years before they sold it after my brother and I were all gone and they moved back to Salt Lake.  I have lots of memories in that home.  Some of the memories are of all the redecorating and remodeling that was done over that period including a MAJOR renovation that they did after my brother and I were out of the house.  Other memories were of Christmas mornings, Thanksgivings with friends, playing baseball and football in the back yard and basketball in the driveway.  I don’t think these memories would be the same in an apartment or home we were renting.  It was our home and I’ve tried to do the same with and for my kids.

Tools for Realtors

For Realtors

I love good technology.  I love tools, software and hardware, that will help me be more efficient or better than I would be if I didn’t have that tool.  With that in mind, here are a few tools for my Realtor friends (clients may very well get great benefit from them as well).

Zoom Video Conference software

This is such a great tool – I use it to meet with Realtors and clients near and far.  If you have an out-of-town client who you want to meet face-to-face with before they come to town to start looking at homes, it’s hard to beat Zoom.  The software is free (there is a paid version but I’ve never felt the need to upgrade to it) and it has lots of features.  It allows you to share screens with each other as well as for either of the people on the call to take control of the other’s computer.  If you have any need for video conferencing, check out Zoom.us.

Google Drive / G-Suite

I’m a big Google fan.  I use gmail and all of the related software including Google Docs, Google Sheets, Google Slides, Google Contacts, Calendar, and the list goes on.  For $1.99 per month, you get 100 GB of storage on Google Drive and you get the ability to share stuff with clients, lenders, title companies, etc. via and email link.  It’s a great way to store contracts and related documents and have easy access to them in the cloud from any device no matter where you are.  For $10 per month, you get G-suite which provides 1 TB of storage and a host of other things for business owners.  If you have your own domain, G-Suite allows you to use gmail and set up your email so that you can have an email like this: name@domainname.com.  If you don’t have a domain, you can get one through google domains very cheap.  Check out G-Suite for the cheap storage alone; you’ll be impressed with all the other stuff you will get.

Word Press

Realtors tell me all the time how they hear that they need a website.  Back in the day, with good SEO (search engine optimization), websites were a good lead generation tool because relatively few Realtors had good websites that were ranking high in google searches (or any search, for that matter).  Today, most agents have websites in some form or another and the lead generation utility of websites is saturated.  That said, I still think it’s important to have a good website.  By this, I mean a site that you can build (or have someone help you build) and then manage it the way you want – it should be your website, not a company website.

You may want to look at your website not so much as a lead generation tool but as a bucket that holds all of your media content that makes it easy for you to share.  For instance, building my website is a continual process and every post I make is a media asset that I can share across social media platforms any time I want.  By having my videos, blog posts, spreadsheets and other media pieces in one place, it makes it easy for me to find any and all of the marketing I’m looking for – I don’t have to remember where I saved a given piece that I want to share with a client (although I do have copies of most of my stuff on external hard drives and Google Drive – I like redundancy) or on social media; I know it’s probably available on my site.  Evergreen pieces (content that is good across time and is not based on a specific occurrence at a specific time) are available for me to share whenever I want, whether it’s a holiday piece that I’ll share every Christmas, or a spring-time home-buying piece or whatever, having my media on my website allows me to be very efficient with how I share it and who I share it with.

Finally, as much as possible, try to create original content.  I can’t tell you how many times I see Facebook shares from Realtors of the exact same article – and I’m not talking about an article they are sharing from a media source like Forbes, CNN, or a similar outlet.  I’m referring to articles that are on their websites – you’re probably familiar with the various options that Realtors have to purchase websites that are built for Realtors and all the content is included in the price so that they don’t have to do anything.  The problem with that is when a client signs up for a home search on your site and does the same on a few other Realtors’ sites and then gets the same content from each place (I’ve experienced this personally), it’s a real turnoff because we know that the Realtor isn’t putting forth any real effort.

I use Word Press – it’s far more than just a blog and is very versatile.  I have one site for my mortgage business and another site for my music production stuff.  I love the ability to change anything I want, whenever I want.  The flexibility is fabulous.

Other tips and tricks:

There are many other tips and tricks that I can share with you to help your business look and be successful.  I will probably put these things in another post, but if you want to get a jump on what some of them are, feel free to contact me and arrange a consultation.

The Young Father and the Three Lenders

Bedtime Stories

Once upon a time a young father decided to apply for a mortgage so he could buy a home for his wife and baby.  He provided all of the necessary documentation to get pre-approved and after a quick review, the loan officer (yours truly) gave the young father an approval.

Excited about the possibilities of what lay ahead, the young father contacted his real estate agent to go look for homes.  They searched far and wide (literally) and finally found a home that worked for the young family that was in their price range.  They wrote an offer and it got accepted and they were on their way to closing on their first home.

Until…

The young father was furloughed from his job with Union Pacific Railroad.  This is not uncommon during slower times and since he was lower on the totem pole relative to his seniority, he was one of the unlucky ones.  He called his loan officer (me) with the bad news and was informed that he would no longer qualify to purchase the home they had found – no surprise to him.

After about five months he was called back to work.  He found out that many employees who had seniority over him who had also been furloughed quit which moved him up the ladder and made it less likely that this would happen again.  The young father contacted me to see how long it would take before he could get approved and was informed (by me) that it would probably take 7-9 months, give or take, before he could qualify since his average monthly income needed to be high enough to service his debt ratio.

Tick Tock

Over the months of working to get his average income level back to where it needed to be, the loan officer (me) contacted the young father on a regular basis to see how he was doing and make sure that he was on track (no pun intended on the railroad reference).  After a little over seven months the young father began to get anxious and wanted to see if a different lender might be able to get him approved to buy a home sooner than the original lender (me).  The first lender he spoke with denied the loan altogether saying that he didn’t qualify for anything.  Frustrated, he called another lender who said he could approve him to buy a home that cost $100,000 – there was really nothing at all this cheap.  Finally, he contacted the original loan officer (me) about eight months after being furloughed and asked to see what I could approve him for.  He provided all of his updated documentation (most recent pay stubs and bank statements) and I pulled a new credit report and I told him that I was able to approve him for $170,000 – he was excited because he knew he could find the right home for his family in that price range.

With the approval in hand, the young father went back out with his Realtor and after looking at several homes, they found another home that was just right.  They made and offer and it got accepted.  This time, there was no furlough and everything went smoothly.  The young father and his family closed on their home and are living there happily ever after.

The Moral of the Story

The lender you use makes a difference.  A lender who understands the guidelines, how to properly calculate income and highlight the positives of a file so that the underwriter feels good about approving it is key to the success of many loans.  When that same loan officer can also provide strategies to help clients create wealth and prepare for retirement, that’s a winning combo.  Contact me and put my experience and expertise to work for you.

 

Winning in the Multiple Offer Game

Bedtime Stories, For Realtors

I’ve been in the mortgage business over 22 years and over that time, I’ve noticed patterns. For instance, the market always takes a pause around the holidays. Buyers typically either want to be in their new home before the holidays – especially Christmas – or they typically wait until after the new year (often times until toward the end of the school year).

This provides a once-a-year opportunity

I had a client who put in offers on several homes over last spring and early summer only to lose out to multiple offer situations with “highest and best” offers.  They took a break for a couple of months and decided to give it another try. They got an offer accepted that was below asking price AND didn’t have to compete with a bunch of other offers.

Many investing gurus say that you shouldn’t always follow the crowd. I think that advice applies here – buy a home now while everyone else is waiting until next year – you’ll get a better price, better rates (they are trending up) and you’ll give yourself and your family an AWESOME Christmas present.  BONUS:  if you move in over the Christmas break, your whole family will be able to help with the kids out of school and a week off of work for you (assuming you have a week of vacation left). Feel free to contact me to see how much you qualify for – happy house hunting.