Hello my Facebook buddies…..We all like our friends, right? So here are 6 easy steps on how to take care of your friends who are looking to buy a home in South Jersey… and how to send a referral to your Favorite Realtor…… uhmm, that’s me…. and of course I’ll make sure they get the best service, advice and guidance. 
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When 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
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! 
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
Points 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
Even 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
It’s a question that I get all the time…. but what’s the REAL question? Maybe some people are just making small talk because they know I’m a broker but many, I believe, want to know if it’s OK to buy a home. Watching the news is scarey and there’s no 
shortage of uncertainty in the real estate markets, so what’s the right thing to do… buy now or wait til the market hits bottom?
Well…. How will you know when the market hits bottom? Will you rely on the nightly news? When will THEY know? Home sale statistics don’t come out for a few months AFTER the fact… so you won’t know we hit the “bottom” until AFTER it’s past…. then you’ll be buying on the way UP! That’s not good either.
Here’s the short answer. Buy now for the long term. That’s it. It’s that simple so let’s not overcomplicate it. If you’re not ready to own the property for the next 3 to 8 years, don’t buy it. If you are ready, then it’s an absolutely GREAT time to buy a property. Prices are down, there are fewer competing buyers in the marketplace, interest rates are very very good, and there’s a bigger selection of homes by double.
The truth is, most people buy or sell when it’s the right time for them and their family, not based on the market conditions. It would be silly to move and rearrange your life every time the market moved one way or the other. Buying and selling a home takes a lot of time, costs a lot of money and by it’s very nature, should be a long term decision.
The Conclusion? If the time is right for your family, 2009 is the right time to buy a home in the south jersey real estate market. It’s OK… and tell ’em I said so 🙂
Thanks for Reading,
Joe Montenigro
REMAX Home Team
I was talking with buyer recently who was looking for a home in my neck of the woods in South Jersey and he made some comments that he though all bank owned properties were in bad condition… the technical real estate lingo is toilet 🙂 ha ha …but it’s just not true. 
In the South Jersey real estate market you see a wide variety of homes that are bank owned. While I’ll agree, that most of them are dirty and even a little ugly, many of them are not that far from being pretty darned nice! And they’re in all different price ranges and locations…. I’ve seen many REO’s in the $300k to $500k range in South Jersey. As an experienced REALTOR, I’d say many many home buyers can and SHOULD consider buying bank owned properties so long as they have the correct expectations. Later, I’ll write more on the advantages and disadvantages of buying a bank owned property.