A challenge that many current homeowners face is that they do not want to sell in this market because of how bad a market it is for sellers. Many people need the profit from their current home to be able to afford to buy another one. This is not so much a challenge, as it is an opportunity, if you have equity in your home and you know what to do.
Get a low interest rate home equity line of credit for the home that you are in. There are many opportunities for getting great home equity loans right now with no closing costs and outrageously low interest rates. I recently got a home equity line of credit from Regions bank. It is a variable rate- no, variable rate is NOT a bad word- it can be a fantastic opportunity as long as you choose the right kind of loan at the right time. I purchased my current home with a variable rate loan from Suncoast bank while the interest rates were already low and I’m currently paying only 4% on my home loan. Then, last year during these very low rates, I got a home equity line through Regions bank and that loan is interest only payment for 20 years (I pay more than just interest by choice, but it’s good to have the option when it’s a tight month) and my interest rate is now down to 3.75% !!! A $75,000 loan only carries a payment of less than $200/month!! You can actually purchase a home for less than $75,000! You can use the money from the HELOC in these ways:
1) Take the full amount of the loan and buy a smaller home. You can get a 3BR house starting in the 30’s, though the ones for at least $50K are more realistic investments. You could rent it out for 4 years with a cost of only $200/month toward your loan and maybe $250/month to taxes and insurance. Depending on what you buy, there’s an excellent chance that you can DOUBLE your investment within 2-4 years just in the equity of the sale!
2) Take money from an equity loan and use it toward the down payment on your dream home. Maybe you’re ready for a larger house or you always wanted some property where you could keep a horse or you want to retire on the beach? Keep the house that you’re in as an investment and rent it. Though you may not make much or any profit from the rental, you’ll make plenty of money when you sell in a 2-4 years and you can still claim the interest on both loans against your taxes.
3) Spend it on a vacation home. This is my favorite option. Beach properties are opportunities for short-term rentals- people visiting for a week or a month. This gives them higher income opportunity, allows you to use them yourself at least a couple of times a year, and qualifies for a second home tax credit. These buys will certainly balloon when values go up, making a tidy profit!
If you’re curious about such options, let me know and I’ll be happy to give you some guidance and point you to decent resources. If you do decide to get an equity loan so that you can purchase something else, let me know. I don’t do loans, but I can get you some good comps for the appraiser so that he values your current home as high as possible.
Another option, depending on how much equity you have in your home, would be to sell now at the lower price because of how much you’ll save on your new purchase. I consider this a less desirable option because of the missed opportunity for investment, but it’s still an option. As a non-short sale/ no foreclosure home, you’ll still have to compete with the prices of distressed sales, but your home will be more appealing to buyers and realtors because they won’t have to deal with the short sale process. If your home is currently worth about $225K, but you could get $300K in a couple of years, that’s down $75K, but you could possibly get a home at ½ its value (now only $250k, but later would cost $500K), so that would be a savings of $250K and a huge savings at the current interest rates. Even after you subtract the $75-$100k that you might be losing to sell now, you’d still be more than $175K ahead, not including the interest rate. Current rates are hovering at an unbelievable 4.78%!! To put that into perspective: If you owe $200K on your home loan, and you were paying a comfortable 6.5% (historically, this is a LOW rate), your principal & interest payments would be $1264.16/month, when compared with the current 4.78% which yields principal & interest payments of $1046.91/month. That’s a savings of $217.25 each month and $78,210. over the life of the loan!! If you were to keep this house until it’s paid off, that would bring your total savings (minus the $75K lost to selling in a down market) as high as $253,000. That’s more than the $250,000 you’d be paying for it in the first place. The drastic changes in the real estate market have illustrated very clearly that timing is everything. The economy is bad, so many people don’t have the option of buying. If you do have the option of buying, it’s foolish to wait.
Saturday, June 6, 2009
South Pasco is a Goldmine!!
South Pasco, where the most growth happened during the boom, is any area of much higher inventory than most places in the country. It’s got great roads, new schools, high-end new commercial development, and a GLUT of homes for sale. What’s better is that many of those homes are new!! And Pasco taxes are the lowest taxes anywhere near Tampa. Their taxes there are so low that the communities that charge CDD’s still only have a tax bill no higher than those in Hillsborough County. You can purchase a home there for 50% of what its value should be. In fact, the projection for this area is so good, that you can still get a 100% loan there. Why? Because of how steeply those values will increase over the next couple of years. I don’t foresee a big jump in average home values any time soon, but there are fewer homes on the market to choose from, and the homes in places like South Pasco will have more pronounced price increases. Most parts of South Pasco are within a 25 minute drive from Tampa International Airport, and beautiful, secluded-feeling communities are within 3 miles of restaurants, grocery stores, shops, malls, etc.
Why Prices are Leveling Out
The banks are no longer free-falling. They are banking. Because of that, they are not giving away properties. The prices have been brought down to a very affordable level, so any homes that cannot sell at the right price, are now being held & rented because the banks know that the Tampa market is going to yield very healthy equity profits. Most of you know that the other business I manage is our remodeling business, Jersey Joe’s Home Improvement & Repair, Inc. Working on both sides gives me a unique perspective, and I can tell you that we’ve seen a drastic increase in foreclosures being fixed up and rented out by the banks. Prices have held steady for 4 months now. If you’re waiting for prices to drop further, you’ll miss the boat! Do not miss this opportunity!
Friday, June 5, 2009
What the New $8K Credit Up-front Is Likely To Do
What the New $8K Credit Up-front Is Likely To Do
(Sales must be finalized by Nov 30 to qualify!)
Most of you have already heard about the $8,000 tax credit that is currently being offered by the government to new homeowners or to those who haven’t owned a home in at least 3 years. The purpose of the credit is to boost the housing market and help the economy. A combination of very low prices and this incentive have already helped us “turn the corner” in April. Sales and offers have increased dramatically, and, though prices remain low, they also stopped declining 4 months ago. The problem with the credit is that many people cannot access $8,000 up-front and wait until the following year for the credit. New legislation is making it possible for new homeowners to access the credit UP-FRONT. Though this opportunity is not ready just yet in FL, it is coming very soon. When it does, the loan market will be flooded with more new applicants than they can handle in a timely fashion! If you’ve been considering buying a home, but you’ve been waiting to apply for a loan- DO NOT WAIT! Apply NOW! Even if you don’t buy right away, it is simple enough to renew a pre-approval, instead of applying all over again. If your credit “isn’t ready,” it can be if you start right away. Most credit issues can be resolved in less than a year. The longer you wait to contact a professional, the longer it will take and the more opportunities you’ll be missing.
Lastly, if you don’t need the $8,000 up front or don’t qualify for the credit, but you’ve been considering buying, please understand that you will have many other buyers with which to compete if you wait until the up-front goes into effect – MANY more- and it’s likely to go into effect within a month. You have a much better chance of getting the best deal before that happens. In the current state of our economy, it’s not likely that we’ll see prices make a big jump up any time soon; however, we are already seeing selection and inventory go down, and even an increase of $20K can make a difference in the affordability of a home. Everyone who knows me understands that I’m far from a pushy salesperson, but I want to be sure that everyone understands what’s going on in this market. This is literally a once-in-a-lifetime kind of a market. Do not lose the opportunity!
(Sales must be finalized by Nov 30 to qualify!)
Most of you have already heard about the $8,000 tax credit that is currently being offered by the government to new homeowners or to those who haven’t owned a home in at least 3 years. The purpose of the credit is to boost the housing market and help the economy. A combination of very low prices and this incentive have already helped us “turn the corner” in April. Sales and offers have increased dramatically, and, though prices remain low, they also stopped declining 4 months ago. The problem with the credit is that many people cannot access $8,000 up-front and wait until the following year for the credit. New legislation is making it possible for new homeowners to access the credit UP-FRONT. Though this opportunity is not ready just yet in FL, it is coming very soon. When it does, the loan market will be flooded with more new applicants than they can handle in a timely fashion! If you’ve been considering buying a home, but you’ve been waiting to apply for a loan- DO NOT WAIT! Apply NOW! Even if you don’t buy right away, it is simple enough to renew a pre-approval, instead of applying all over again. If your credit “isn’t ready,” it can be if you start right away. Most credit issues can be resolved in less than a year. The longer you wait to contact a professional, the longer it will take and the more opportunities you’ll be missing.
Lastly, if you don’t need the $8,000 up front or don’t qualify for the credit, but you’ve been considering buying, please understand that you will have many other buyers with which to compete if you wait until the up-front goes into effect – MANY more- and it’s likely to go into effect within a month. You have a much better chance of getting the best deal before that happens. In the current state of our economy, it’s not likely that we’ll see prices make a big jump up any time soon; however, we are already seeing selection and inventory go down, and even an increase of $20K can make a difference in the affordability of a home. Everyone who knows me understands that I’m far from a pushy salesperson, but I want to be sure that everyone understands what’s going on in this market. This is literally a once-in-a-lifetime kind of a market. Do not lose the opportunity!
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