FOUR REASONS TO RENT YOUR VACATION HOME

If you have a vacation home that you had hoped to retire to some day but have since changed your mind, don’t jump to sell it…consider renting it out instead.

For many, it seemed like a great idea to buy that vacation condo 20 years ago. The plan was to vacation there as often as possible, then some day sell your primary residence and retire there for your Golden Years. But lifestyle changes or financial situations might now be causing you to consider selling it instead.

However, I have seen many a client successfully rent a retirement home instead of selling it. Author Christine Karpinski, director of Owner Community for HomeAway.com (HomeAway.com), offers some good reasons to consider renting your second home:

1. Circumstances have changed. Maybe grandchildren have arrived on the scene and you can’t bear the thought of moving hundreds of miles away from them. Or your parents are in poor health and need you nearby.

2. You’ve suddenly realized there’s no place like home and you’ve simply changed your mind. You’ve decided you like being near your friends and you don’t want to leave your church or synagogue. Renting your second home out during the time you are not staying there makes it financially feasible to keep both homes.

3. You’ve decided to “retire” from retirement. These days, it’s not unusual for people to test-drive retirement and find that it’s just not for them. Work can provide many rich rewards—structure, social interaction, mental stimulation, a sense of purpose, and so forth—that people keenly miss when they retire. And, let’s be honest—sometimes people simply can’t afford to retire.

4. Your fixed income hasn’t kept up with your lifestyle. Even when you’re happy to give up the daily grind of your job, losing the paycheck that comes with it can be pretty painful. Factor in inflation, rising taxes, and unexpected “new” expenses, and you may find that what seemed like a manageable cost of living five years ago doesn’t seem that way anymore. Your second home, even if it’s paid for, may start looking like a liability due to property taxes, homeowner’s association dues, and maintenance costs. Not if you rent it out, says Karpinski. Then it becomes a source of new income.

So don’t give up and seek to unload your second home just yet! There are still many ways to make this investment pay off. For more information on renting or buying a second, potential retirement home, please e-mail our team. And please forward this email to any friends and family who could benefit from these insights.

Shocking News About Credit Scores

It has been reported that in the United States there are  42.4 million people (approx. 25%) whose credit scores (FICO) are below 599,  in comparison with the 25.5 million (approx. 15%) whose scores were below 599 before the meltdown.  Add to that the fact that 26 million people are out of work with many foreclosures pending and you can see where this is going.  

There is a difference between people who were unwillingly placed a situation that caused them to make a choice between paying their bills or feeding their family,  and those who chose to “strategically default” on their loans.  Strategic defaulters are people who can afford to pay their bills but choose not to.   They know their credit scores will be affected and the make their plans ahead of time to compensate for their diminshed scores.

Not everyone who defaults on a loan has a choice; and I feel they should be given special consideration once they are back on their feet and capable of making payments.  Their credit scores should not be treated the same way

These are just my thoughts as I consider the situation we are in right now. As a Realtor I know that there are a lot of people who deserve a second chance.  Financial reform has to happen and it has to happen sooner than later or there will be a lot of people unable to buy a home any time soon.

A DUMB REASON NOT TO BUY A HOME

Whenever we purchase any big-ticket item we first look at the price.  Unless you are buying all cash, you must take into consideration the expense of financing your purchase.   In real estate the expense of financing is the mortgage interest rate.  Let’s take a look at how interest rates impact the monthly cost of a home. 

If prices goes down but interest rates rise, it could mean an actual increase in the monthly cost.  Look at the chart.  Prices would need to go come down 10% to make up for one percent increase in mortgage rates.  You could decide to wait on your purchase based solely on price (dumb),  but if you think interest rates are going to rise in the future it probably makes sense to purchase now (smart).

Interest rates are at historic lows.  If we look at interest rates since 2000, we find that the average monthly rate was 6.29%.  That is more than one and one-half percentage points higher than where they stand today.  Though experts are pulling back on their original predictions of 6% rates by the end of the year, there is growing concern that rates will start to rise.  Bankrate.com does a weekly survey of analysts to determine how many think rates will increase in upcoming months.  The graph below shows that the number expecting rates to rise has been trending upward over the last two months.

When considering whether it makes financial sense to purchase a home,  make sure you are considering the cost not just the price.

GREAT BUY IN FOREST RIDGE

3 BEDROOMS/2 BATHS/2 CAR GARAGE   LIST PRICE:  $199,000. 

This home is a great buy for an investor or for a end user.  It’s located in the Arborwood section of Forest Ridge in Davie, Florida.  Forest Ridge is a community of approximately 1600 homes, including The Ridge on Nob Hill.  It is located in the center of Broward County not far from NovaSoutheastern University, Broward College and branches of the University of Florida, Florida International University and Florida Atlantic University. 

The quarterly maintenance fee is $250.00.  Amenities include a community pool, tennis courts, and walking and riding trails.  Bamford Sports Park is just a bike ride away, featuring an Olympic sized pool, soccer fields, baseball diamonds, roller hockey rink, tennis courts, a community room, indoor basketball and more.  Swim lessons, dance classes, yoga and other programs are offered through the Department of Parks and Recreation.  Senior activities and programs also take place in the community center. 

This is the lowest priced home in the community and with interest rates today this home could be a money maker for you.Similar homes in the community rent for approximately $1700-$1800 per month.

Long Term Real Estate Investors Are In For A Bonanza

Your Golden Opportunity

John D. Rockefeller said, “The way to make money is to BUY when blood is in the streets.”   Another noted rich-guy said, Warren Buffet,  believes you should “be fearful when others are greedy and to be greedy only when others are fearful.”  Huge success comes to those who see confusion as an opportunity.  More millionaires were created as a result of the Great Depression than at any time in the nation’s history.  Today, there is a significant opportunity for new millionaires to be made.

With interest rates at historic lows and home values where they are (the Housing Affordability Index is as favorable as it has ever been) I have one question….”Why hasn’t everyone jumped into the market?”  Housing is still one fo the most basic of needs (food, clothing, and SHELTER).

Real estate is the way to building a financial fortune.  Today, rents collected can cover mortgage payments, often creating a positive cash flow.  That is a critical determinant to the strategy; buy something, have the rent make the payment, and wait for the market to improve.  Ten years from now you will be glad you did.  This is no “get rich quick” scheme.  It is a long term commitment.

I believe that to eat up all this inventory we are going to have to entice more people who want to own their own slice of the American Dream into the market.  We need to bring back the entrepreneur to real estate…the investor who wants to “buy and hold” real estate for a long-term investment.  Investors uy multiple units/homes and find long term results that outpace the stock market.

WHAT IS HOLDING PEOPLE BACK?

1.) Fear of further declination of home values(better known as greed).  The “Why buy now if prices are going lower?” mentality will hurt today’s buyer the same way as the “Why sell now when prices continue to climb?”  mentality hurt sellers 5 years ago.  By the way, who cares if prices delcine in the short run, you have a positive cash flow, remember?  And, you’re not selling this home for 10 years.  It’s like losing your first bet in the casino.  It doesn’t matter until you leave the building before you determine if it was a good day.

2.) Limited Financing Options.  For competitive rates, most lenders require 25-35% as a down payment (while there are limited programs with 20% down at higher rates).  When mortgage programs constricted, investor loan products were among the first to go because people are more likely “not to pay” the mortgage on the house they don’t live in.  But with conservative loan- to- values and A+ borrowers being the only people being approved for these loans, there is a reason to believe that the tightening may be loosened a bit.

3.) Being A Landlord.  Many people don’t want to be bothered collecting rents or getting the phoe calls in the middle of the night that the air conditioner doesn’t work.  I see this as an opportunity for more real estate agents to become Property Managers, where they can take on these headaches for the invesors (for a fee).  Agents are best positioned to identify property, find a tenant, and manage rent collection and home improvement/maintenance issues.

There are real estate speculators (who buy low, fix up, and hope to sell high), but that is a full time job that should be left in the nads of the experienced professional.  

Let’s look at an example of a long term investor who is bullish on the long term value of real estate in America.

Buy a home for $200,000, expend $50,000 for a down payment and clsoing costs, and have your monthly carrying costs covered by rent.  If you sell the property in 15 years for $400,000, you did not double your money, you had a 400% return on your money (because you only used $50,000 cash to get your $200,000 profit).  The fact that you canleverage real estate is how fortunes are made.  If you could cover your expenses through rent payments received, and leverage your cash invested at a 3:1 ration, WHY WOULDN’T YOU EXPLORE THIS STRATEGY TO BUILD YOUR FUTURE NEST EGG FOR RETIREMENT???