Month: February 2009

By Posted on Posted in Buyers, Investment Property Tagged with , , ,
Feb
25
2009

question-mark_cartoonWhen you buy an house, how will you KNOW whether you got a good deal or not?   A commom misconception is to see how much the seller discounted the asking price and then decide if that’s a “good” discount or not.   I’m not sure how you magically guess the appropriate discount to qualify for a “good” deal, but that’s another story. So, here’s a QUIZ….. Which house is a better deal?

1. House 1: Asking price $100,000, purchase price $80,000.
2. House 2: Asking price $100,000, purchase price $105,000.
3. Neither house
4. Both houses
5. All of the above.

If you answered 5, you’re clearly confused and probably shouldn’t walk while chewing gum.   If you answered, house 1, what if the last 3 homes like house 1 sold for $50,000?   Would you want to change your answer?   If you answered house 2, what if the last 3 homes like house 2 sold for $150,000?   Would that change your mind?   If your answer is 4 that both houses are equally a good deals, technically, you really have no idea if either one is a good deal or not because you don’t know what other homes like it have sold for and that’s why the correct answer is 3, neither.

Homes are generally valued by the comparison approach which means we compare the house to similar homes that have recently sold….  called comparable sales or comps, for short.   You absolutely, posititvely MUST look at the comps to know whether or not you got a good deal.   You absolutely, positively must NOT use the seller’s discount from asking price as an indicator of whether you got a good deal.   Of course, we’re ignoring that you and your family have to like the house, it has to fit your needs and make you happy….  if the house makes you and your family happy, you can disregard the comps althougher because it’s a GREAT deal.

Thanks for reading
Joe

By Posted on Posted in Buyers, Investment Property Tagged with , , ,
Feb
20
2009

If you’re at the clothes store, and you buy a shirt off the clearance rack for 90% off, is it a good deal?   What if it doesn’t fit you or it’s just plain ugly !?   I’ve been getting a lot of calls on a really low priced bank property from would be Investors looking for an investment property.    So, is cheaper really better?   Not if cheaper doesn’t “fit”your investment goals! smhouse

I recommend thinking about what kind of property you want, then compare prospective properties to your “criteria” to see if they fit.   This will help you objectively decide which properties are good for you and which ones aren’t and will set you apart from the investors wouldn’t know a good deal if it hit them in the face.

For example, would you prefer…..
1. Single home vs Townhome vs Condo vs multifamily?
This will affect the kinds of tenants you attract.
2. Monthly cash flow from rents or long term appreciation of property value?
They’re pretty much mutually exclusive, pick which one you want.
3. Location, location location???
of course this is a critical part of your investment plan.
4. Property Manager or No?
A location close to will be easier to manage yourself if you’re not going to hire a property manager.
5. Cash purchase or financing?
Cash allows you buy homes that are in poor condition so opens more opportunities. Financing makes your offer less competitive and there are many challenges with investor financing…. Be thorough in your pre-qualifying for an investor mortgage.
6. Price range?
How much cash do you actually have or how much mortgage can you actually get?
7. What’s the minimum rate of return that you require?
Cash on Cash is the first and easiest calculation…. Cash in divided by Cash out. $x rent after expenses divided by a $x purchase would be x% return.

Well, that’s it for now…. 2009 is a great time to buy investment property in South Jersey.   Let me know when you’re ready to take the first step and together we’ll develop a basic plan to get you started.

Thanks for reading
Joe Montenigro
REMAX Home Team

By Posted on Posted in Snappy answers to stupid questions Tagged with
Feb
11
2009

(Warning, another rant about to start)  If it only happened once or twice I’d be fine, but I can’t count how often I’m showing a propety to a prospective home buyer and as we walk in to the house, there’s no furniture, no curtains, no appliances, no evidence of human life or activity for centuries.   The heat is off and you can see your breath in the cold air, in fact, it’s colder inside the house than outside the house!   After 5 steps into the house the buyer has a burning question that they just can’t hold back for the searing urgency of it……….   Is this house VACANT !!??!!
idiot-picture
My answer? OMG, NO !!!   The homeowner knew that it was YOU coming to look at the home because they saw the nightly news flash that YOU have finally decided to enter the South Jersey real estate market to “consider” buying a home after selling your Star Wars action figure collection to raise the down payment money….. so they MOVED all of their stuff OUT of the house so that you could see the home better and as soon as your highness leaves, they will move thier stuff back in and resume thier normal life, basking in the after glow of your presence in thier humble home.      Idiot.

By Posted on Posted in Snappy answers to stupid questions Tagged with
Feb
10
2009

(Warning… rant about to start) I just LOVE IT when an investor/ home buyer tells me they want a “good deal”. Thank you, Captain Obvious, I didn’t know that.

So what if you went into a diner to eat and said…. “give me something that tastes good” …they would look at you kinda funny, right? Let’s say that they played along with you and brought you out a cheeseburger, but you don’t want it and you say “no thank you”. So they go back in the kitchen and bring you a nice steak, but you don’t want that either. Ok, fine….they bring you bowl of pasta? No. How about fish? No. Maybe a nice bowl of soup? Nope. At what point does the waitress crack you in the head with a frying pan because you’re a moron? frying-pan-head

So I get a phone call on one of my bank owned listings from an “investor” who says he wants a good deal… any price range in any area of South Jersey any kind of house. Ok, well, what do you have in mind? do you want to rent it or flip it? He doesn’t really care but he also owns a big home with no mortgage and is thinking of downsizing and buying something for himself to live in and he’s also keeping an eye open for his daughter to buy something because the market is so good to buy good deals. Ok, Mr Super Investor, I know this is my lucky day because I’ve been graced with the honor of your phone call and you’ve just told me how you want to buy or sell 3 homes (or was it 4 homes) in the next 24 hours and I know you’re obviously a big shot, because you just kinda told me so and only the really really SMART investors remember to tell me that they’re looking for a “good deal”. After 20 minutes on the phone, I was looking for that frying pan to crack MYSELF in the head when he concluded with “call me if you find anything that you think I might like” Ugggg… if I only knew what the heck that was !!!

By Posted on Posted in Buyers Tagged with , ,
Feb
2
2009

the_thinking_capPoints are the closest thing to legalized bribery!   When applying for a mortgage to buy a house, you can pay the lender a fee to get a better interest rate.   The fee is called a point and is 1% of the amount you borrow.   You could pay one or many points.   The point costs you money upfront but the lower interest rate saves you money each month on your payment.   So, the trick is to calculate the breakeven point.   In other words, how long will it take you to recoup the upfront fee in monthly savings on your payment because of the lower interest rate.   Simply calculate the payment for two interest rates and find the difference, that’s your monthly savings.   Then divide the amount of the points by the monthly savings and the answer will be the number of months to breakeven.  Your decision on whether or not to pay points will depend primarily on how long you plan on living in the house.   Also, if you think you’re likely to refi in the near future, you might not want to pay the points.   Points are usually tax deductible on a home purchase but on a refi they may need to be deducted over several years.
Thanks for reading,
Joe

By Posted on Posted in Buyers Tagged with ,
Feb
1
2009

moneyhouse2Even though there are tons of mortgage calculators on the web, here’s a quick and easy way to ballpark your monthly mortgage payment in your head.    If the house is $200,000, just multiply by 10% and subtract “a little bit” So, your payment should be a little under $2000/month…maybe $1700/month would be a good guess, depending on the taxes and interest rate.

If you don’t mind a little math, you can use interest rate “factors” to make this simple and this is the only part you’ll need to memorize…. if your interest rate is 5%, the factor is 5.37. If the rate is 6%, the factor is 6. If the rate is 7%, the factor is 6.65.

Now, multiply the factor by how much you want to borrow…. for example, $200,000 at 5% rate, is $200 x 5.37 equal $1,074/month. Don’t forget, you also have to pay property taxes, homeowners insurance and private mortgage insurance (PMI or MIP) if you put less than 20% down.   Take the annual taxes dived by 12 months and add that to the payment, let’s guess $5400/year or $450/month… a nice round number 🙂    Estimate your homeowners at $4 for every thousand of purchase price, so $4 x 200 that’s $800/year or $67/month and add that too. So that’s $1074 plus $450 plus $67 equal $1591 and let’s add $100 for PMI (I’ll show you how to figure that later) so were up to $1691/month.

So, use a calculator, or ballbark it right in your head…. Hope that helps!     BTW, if you want a 15 year loan or different interest rates, just google “interest rate factor” and you’ll see everything you ever wanted to know.
Thanks for Reading,
Joe