How to Prepare to Buy Your First Home

First Time Homebuyer Tips

Buying your first home is exciting and overwhelming all at once. Before you get in over your head, use these simple tips to best prepare you for one of the largest investments you’ll make in your lifetime.

Save for a Down Payment

The earlier you can save for a down payment the better. While you don’t need 20% down to buy a home, the more money you invest, the easier it is to get financing. Plus, you’ll keep your mortgage payment down which not only helps you qualify for a loan but helps keep your payment affordable for the next 15 to 30 years.



Check your Credit

Your credit score is one of the most important factors in your application. It’s what lenders look at first and if it’s not high enough, they won’t approve your loan.

Everyone gets free access to their credit report weekly at www.annualcreditreport.com. Check all three credit reports and see what you need to fix. Look for:

  • Late payments
  • Credit utilization over 30% of your credit limit
  • Collections
  • Errors

Fix any issues you can and maximize your credit score. If you want to see your actual score, check with your credit card companies or bank – they may offer free access to your score too.

Get Pre-Approved (not Pre-Qualified)

Before you shop for a home, get pre-approved. Even if you think you have ‘great’ credit and good income, find out what a lender thinks first. We recommend getting quotes from at least 3 lenders so you can compare your options side-by-side.

You may find you get approved for more or less than you thought you could afford. A pre-approval letter also helps get your foot in the door with sellers. Many sellers won’t show their homes or entertain offers from buyers without a pre-approval.

Stick to your Budget

It’s tempting to go ‘slightly’ over your budget especially when you see it only makes a difference of a few dollars in your mortgage payment, but it’s a bad idea. Don’t get caught up in a bidding war or get so emotionally attached to a home that you outbid yourself. Stick to your budget and know that the right home will come along.

Exhaust all First Time Homebuyer Assistance Programs

As a first time homebuyer, you have many options for assistance. Talk with your lender and me to find out what programs are available to you. From low and no down payment loan programs to down payment grants, there are programs for borrowers of all walks of life.

Bottom Line

First time homebuyers have plenty of opportunities to secure a home. Even if you don’t have a 20% down payment or perfect credit, there are options available for you. The key is to maximize your qualifying factors as early as possible so you increase your chances of securing your dream home.

I’m always available for questions or help – together we can help you prepare for and buy your first home, making it a stress-free and fun process!

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How to Calculate your Debt-to-Income Ratio

If you’re in the market to buy a house, your mortgage lender will look at a couple of main factors to determine if you qualify. Most people know they check your credit score and credit history, but they aren’t aware of the debt-to-income ratio and how it works.

What is a Debt-to-Income Ratio?

Your DTI is a comparison of your monthly debts to your gross monthly income (income before taxes). The higher the percentage is, the higher your risk of default becomes. Lenders like borrowers with a DTI of 43% or less. This leaves plenty of money for living expenses and savings, reducing the risk of default.

What’s Included in your Debt-to-Income Ratio?

The only information you need to calculate your DTI is your total debts and total income.





Debts to Include in your DTI

The debts you include are those on your credit report. A few examples include:

  • Car payments
  • Minimum credit card payments
  • Personal loan payments
  • Student loans

The DTI also includes the new mortgage you’re applying for which includes the principal, interest, real estate taxes, and homeowner’s insurance. It also includes any HOA dues and mortgage insurance, if applicable.

Income to Include in your DTI

You can include any income the lender will use for qualifying purposes. Obviously, this includes your full-time income. But if you have any other sources of income that have a two-year history and will continue for the foreseeable future, you may include them too.

Common examples include alimony or child support you receive or side gigs you run with income you can prove.

Calculating your DTI

With these two totals, you can calculate your own debt-to-income ratio using this calculation:

Total debts/Total income = Debt-to-income ratio

Here’s an example.

Jan makes $7,000 a month before taxes. Her debts include the following:

  • Minimum credit card payments $150
  • Car payment $300
  • Student loan payment $250
  • New mortgage payment $1,750

Jan’s debt-to-income ratio is:

$2,450/$7,000 = 35%

How to Lower your Debt-to-Income Ratio

If your debt-to-income ratio is higher than a lender might like, here are a few ways to lower it:

  • Pay your credit cards down or off – If you have credit card debt, try to pay it off. If you can’t, at least pay them down so your minimum payment drops, and you lower your DTI.
  • Pay down other debts – If you have other consumer debts you can pay down to have less than 6 payments, lenders may exclude them from your DTI
  • Increase your income – If your income is too low, take on a part-time job or start a side gig. You’ll need to show receipt of income for a while, so the sooner you start it the better.

Final Thoughts

Your debt-to-income ratio is just as important as your credit score. Take the time to figure out your DTI and where you stand before thinking about buying a house. You can prepare both your credit score and debt ratio early on to increase your chances of loan approval.

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If you’re in the market for a house, you might think about the features the house has or the price, but how often do you think about the mortgage rate?

Many buyers I work with don’t realize the importance of the mortgage rate, so I’m here to clear the air so you make an informed decision.

What is a Mortgage Rate?

The mortgage rate is the fee the lender charges you to borrow money. You borrow principal, or the amount of the loan and the interest is the fee they charge you. Your monthly mortgage payment includes both the principal (loan amount) and interest (the bank’s fee).

How Much of a Difference Does the Mortgage Rate Make?

You might not think the mortgage rate makes that much of a difference. After all, if it’s just 1%, how much more could you pay?

The difference is tremendous, especially if you’re talking about a 30-year loan. When you borrow funds for 30 years, you keep the bank’s money for that time. This means they charge you interest over 30 years versus 10 or 15 years on a shorter term loan.

Here’s an example:

You borrow $230,000 at 4% for 30 years. Your principal and interest payment are $1,098 and over the life of the loan, you’d pay $165,299 in interest. That’s in addition to the $230,000 that you pay back (the money you borrowed).

Now, if you borrowed $230,000 at 5% for 30 years, your principal and interest payment would be $1,234 per month and over the life of the loan, you’d pay $214,488 in interest.

That’s a difference of $49,189! I’m sure there’s a lot you’d rather do with that amount of money instead of paying the bank, right?

How to Lower your Interest Rate

So how do you make sure you get the lowest interest rate? While every lender is different, here are some ways to ensure you get the best rate possible.

  • Pay your bills on time
  • Don’t overextend your credit lines, keep your credit balances at 30% or less of the total credit limit
  • Dispute any incorrect information on your credit report
  • Keep a stable job and income
  • Make sure your monthly debts including the new mortgage are 43% or less of your gross monthly income
  • Don’t have any collections on your credit report
  • Make a large down payment

Lenders like it when borrowers are a low risk of default. You can be this by providing great credit, a large down payment, and solid employment and income histories.

Final Thoughts

Your interest rate makes a big difference in your mortgage payment and even what house you can afford. Sometimes even an interest rate that ½ point higher can make you ineligible for a mortgage loan.

Don’t take a chance. Shop around and get the best interest rates possible all while ensuring that you present lenders with the least amount of risk as possible.

If you have questions or would like to be connected witha local, reputable lender, please contact me today.

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Take Advantage of Your Home Equity: A Homeowner’s Guide



Homeownership offers many advantages over renting, including a stable living environment, predictable monthly payments, and the freedom to make modifications. Neighborhoods with high rates of homeownership have less crime and more civic engagement. Additionally, studies show that homeowners are happier and healthier than renters, and their children do better in school.1

But one of the biggest perks of homeownership is the opportunity to build wealth over time. Researchers at the Urban Institute found that homeownership is financially beneficial for most families,and a recent study showed that the median net worth of homeowners can be up to 80 times greater than that of renters in some areas.3

So how does purchasing a home help you build wealth? And what steps should you take to maximize the potential of your investment? Find out how to harness the power of home equity for a secure financial future.


WHAT IS HOME EQUITY?


Home equity is the difference between what your home is worth and the amount you owe on your mortgage. So, for example, if your home would currently sell for $250,000, and the remaining balance on your mortgage is $200,000, then you have $50,000 in home equity.

$250,000 (Home’s Market Value)

-           $200,000 (Mortgage Balance)

______________________________

             $50,000 (Home Equity)

The equity in your home is considered a non-liquid asset. It’s your money; but rather than sitting in a bank account, it’s providing you with a place to live. And when you factor in the potential of appreciation, an investment in real estate will likely offer a better return than any savings account available today.



HOW DOES HOME EQUITY BUILD WEALTH?


A mortgage payment is a type of “forced savings” for home buyers. When you make a mortgage payment each month, a portion of the money goes towards interest on your loan, and the remaining part goes towards paying off your principal, or loan balance. That means the amount of money you owe the bank is reduced every month. As your loan balance goes down, your home equity goes up.

Additionally, unlike other assets that you borrow money to purchase, the value of your home generally increases, or appreciates, over time. For example, when you pay off your car loan after five or seven years, you will own it outright. But if you try to sell it, the car will be worth much less than when you bought it. However, when you purchase a home, its value typically rises over time. So when you sell it, not only will you have grown your equity through your monthly mortgage payments, but in most cases, your home’s market value will be higher than what you originally paid. And even if you only put down 10% at the time of purchase—or pay off just a small portion of your mortgage—you get to keep 100% of the property’s appreciated value. That’s the wealth-building power of real estate.


WHAT CAN I DO TO GROW MY HOME’S EQUITY FASTER?


Now that you understand the benefits of building equity, you may wonder how you can speed up your rate of growth. There are two basic ways to increase the equity in your home:

  1. Pay down your mortgage.


    We shared earlier that your home’s equity goes up as your mortgage balance goes down. So paying down your mortgage is one way to increase the equity in your home.

    Some homeowners do this by adding a little extra to their payment each month, making one additional mortgage payment per year, or making a lump-sum payment when extra money becomes available—like an annual bonus, gift, or inheritance.

    Before making any extra payments, however, be sure to check with your mortgage lender about the specific terms of your loan. Some mortgages have prepayment penalties. And it’s important to ensure that if you do make additional payments, the money will be applied to your loan principal.

    Another option to pay off your mortgage faster is to decrease your amortization period. For example, if you can afford the larger monthly payments, you might consider refinancing from a 30-year or 25-year mortgage to a 15-year mortgage. Not only will you grow your home equity faster, but you could also save a bundle in interest over the life of your loan.

  2. Raise your home’s market value.

Boosting the market value of your property is another way to grow your home equity. While many factors that contribute to your property’s appreciation are out of your control (e.g. demographic trends or the strength of the economy) there are things you can do to increase what it’s worth.

For example, many homeowners enjoy do-it-yourself projects that can add value at a relatively low cost. Others choose to invest in larger, strategic upgrades. Keep in mind, you won’t necessarily get back every dollar you invest in your home. In fact, according to Remodeling Magazine’s latest Cost vs. Value Report, the remodeling project with the highest return on investment is a garage door replacement, which costs about $3600 and is expected to recoup 97.5% at resale. In contrast, an upscale kitchen remodel—which can cost around $130,000—averages less than a 60% return on investment.4

Of course, keeping up with routine maintenance is the most important thing you can do to protect your property’s value. Neglecting to maintain your home’s structure and systems could have a negative impact on its value—therefore reducing your home equity. So be sure to stay on top of recommended maintenance and repairs.



HOW DO I ACCESS MY HOME EQUITY IF I NEED IT?


When you put your money into a checking or savings account, it’s easy to make a withdrawal when needed. However, tapping into your home equity is a little more complicated.

The primary way homeowners access their equity is by selling their home. Many sellers will use their equity as a downpayment on a new home. Or some homeowners may choose to downsize and use the equity to supplement their income or retirement savings.

But what if you want to access the equity in your home while you’re still living in it? Maybe you want to finance a home renovation, consolidate debt, or pay for college. To do that, you will need to take out a loan using your home equity as collateral.

There are several ways to borrow against your home equity, depending on your needs and qualifications:5

  1. Second Mortgage - A second mortgage, also known as a home equity loan, is structured similar to a primary mortgage. You borrow a lump-sum amount, which you are responsible for paying back—with interest—over a set period of time. Most second mortgages have a fixed interest rate and provide the borrower with a predictable monthly payment. Keep in mind, if you take out a home equity loan, you will be making monthly payments on both your primary and secondary mortgages, so budget accordingly.
  2. Cash-Out Refinance - With a cash-out refinance, you refinance your primary mortgage for a higher amount than you currently owe. Then you pay off your original mortgage and keep the difference as cash. This option may be preferable to a second mortgage if you have a high interest rate on your current mortgage or prefer to make just one payment per month.
  3. Home Equity Line of Credit (HELOC) - A home equity line of credit, or HELOC, is a revolving line of credit, similar to a credit card. It allows you to draw out money as you need it instead of taking out a lump sum all at once. A HELOC may come with a checkbook or debit card to enable easy access to funds. You will only need to make payments on the amount of money that has been drawn. Similar to a credit card, the interest rate on a HELOC is variable, so your payment each month could change depending on how much you borrow and how interest rates fluctuate.
  4. Reverse Mortgage - A reverse mortgage enables qualifying seniors to borrow against the equity in their home to supplement their retirement funds. In most cases, the loan (plus interest) doesn’t need to be repaid until the homeowners sell, move, or are deceased.6

Tapping into your home equity may be a good option for some homeowners, but it’s important to do your research first. In some cases, another type of loan or financing method may offer a lower interest rate or better terms to fit your needs. And it’s important to remember that defaulting on a home equity loan could result in foreclosure. Ask us for a referral to a lender or financial adviser to find out if a home equity loan is right for you.


WE’RE HERE TO HELP YOU


Wherever you are in the equity-growing process, we can help. We work with buyers to find the perfect home to begin their wealth-building journey. We also offer free assistance to existing homeowners who want to know their home’s current market value to refinance or secure a home equity loan. And when you’re ready to sell, we can help you get top dollar to maximize your equity stake. Contact us today to schedule a complimentary consultation!


The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

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5 Factors That Reveal Where The Real Estate Market Is Really Headed


It’s the old supply-and-demand predicament: Home sales in the U.S. continue at a torrid pace, but the availability of listings remains limited. Buoyed by historically low mortgage rates, buyers keep shopping for homes, reducing the available inventory and sparking a rise in home prices across the country.


News website The Atlantic summarized the sizzling home market this way:


“Pick a housing statistic at random, and it’s probably setting an all-time record. Home prices: record high. Inventory: record low. Percentage of homes selling above asking price: record high. Average time on market: record low.”¹


Meanwhile, homebuilders are contending with an increase in material costs and a shortage of labor. These issues come amid an ongoing shortage of housing. A study commissioned by the National Association of Realtors found the U.S. is coping with a deficit of about 2 million single-family homes and about 3.5 million other housing units.²


So what can we expect from U.S. real estate? Here are five factors that illustrate where the housing market is today and is likely heading tomorrow.



ROCK-BOTTOM MORTGAGE RATES TO GRADUALLY RISE


Low interest rates continue to fuel demand from homebuyers. Some experts believe mortgage rates will creep up later this year, but they expect rates to remain near historic lows.3 However, the Federal Reserve signaled in mid-June that it may institute two interest rate hikes as soon as 2023, which could then trigger a more substantial uptick in mortgage rates.4


In June, the Mortgage Bankers Association reported that 2020 closed with the average rate for a 30-year, fixed-rate mortgage sitting at 2.8%. But the association anticipates the average rate climbing to 3.5% at the end of 2021 and 4.2% by the end of 2022.5


“As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, chief economist at Freddie Mac.6


What does it mean for you?


You’ve likely heard the old saying about “striking while the iron is hot.” Well, that phrase applies to the current environment for mortgage rates. It’s impossible to predict with certainty when mortgage rates will rise or fall. So, when mortgage rates are at or near historic lows (as they are today), you should seriously consider taking advantage of those rates to borrow money for a home purchase or to refinance your existing mortgage.



HOME PRICES EXPECTED TO KEEP CLIMBING


Low mortgage rates are sparking interest among homebuyers, but some are running into affordability issues.


In June, the national median list price for a home reached an all-time high of $385,000, up 12.7% on a year-over-year basis.7 And according to the Home Buying Institute, various reports and forecasts indicate home prices will keep climbing throughout 2021 and into 2022.8


While this may be welcome news for homeowners, high prices are pushing homeownership out of reach for a growing number of first-time buyers. In a recent CoreLogic survey, 82% of respondents listed housing affordability as a key problem.9


“Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, President and CEO of CoreLogic. “As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”9


What does it mean for you?


If you’re a buyer waiting on the sidelines for prices to , you may want to reconsider. While the pace of appreciation should taper off, home prices are expected to continue climbing. And rising mortgage rates will only make a home purchase more expensive.



SINGLE-FAMILY HOME SALES REMAIN ROBUST


While record-high prices are sidelining some buyers, the impressive pace of single-family home sales marches on.


Single-family home sales are down from their peak in October 2020 yet are still above the overall level last year. In May 2021, 5.8 million existing single-family homes were sold in the U.S. That’s a 45% increase over the 4 million homes sold in May 2020.10


However, home sales saw a 0.9% dip in May 2021 compared with the previous month, the National Association of Realtors says. That was the fourth straight month for a decline in home sales. The number of home sales has slid recently because of rising prices coupled with a shortage of available homes amid intense demand.10


Fannie Mae expects total home sales to tick up slightly in the fourth quarter and finish the year up 3.8% over last year. They also forecast a slight decline of 2.2% in sales volume in 2022.11


What does it mean for you?


The market for single-family home sales remains quite active. As a result, if you’re a homeowner, you may want to ponder whether to sell now, even if you hadn’t necessarily been thinking about doing so. With demand high and inventory low, your home could fetch an eye-popping price.



LACK OF INVENTORY STILL CONSTRAINS THE HOME MARKET


According to the National Association of Realtors, in May there were 1.23 million previously owned homes on the market, down 20.6% from the same time last year.10 This translates to a 2.5-month supply of homes, which is well below the 6 months of inventory typically seen in a balanced market.10,12


According to the Realtors group, this lack of inventory translates into tougher searches for buyers and contributes to a rise in prices.10


“Demand for bigger and more expensive accommodations amid the COVID-19 pandemic, which has left millions of Americans still working from home, is driving a housing market boom. The inventory of previously owned homes is near record lows,” according to Reuters.13


What does it mean for you?


If you’re thinking of selling your home, now may be the right time to do it. Across the country, it’s a seller’s market, meaning demand is outpacing supply. That supply-and-demand imbalance puts sellers in a great position to sell their homes at a premium price. The May 2021 Realtors Confidence Index from the National Association of Realtors found the average home that was sold attracted five offers, and the association says nearly half of homes are selling above list price.14,15



CONSTRUCTION OF SINGLE-FAMILY HOMES SEES SLIGHT UPTICK


Frustrated buyers may soon find some relief, however, from an increase in new construction. Economists forecast that 1.1 million new houses will be started in 2021, compared with a predicted 940,000 units just six months ago, with 1.2 million new starts predicted for 2022 and 2023, according to the Urban Land Institute.16


Amid the rise in home construction, builders are coping with rising costs for materials. In April, the National Association of Home Builders estimated that a surge in lumber prices over the previous year had led to $35,872 being tacked onto the cost of an average new single-family home.17


“Shortages of materials and labor have builders struggling to increase production of new homes, though the demand remains strong,” Robert Frick, corporate economist at Navy Federal Credit Union, told the Reuters news service. “Potential homebuyers should expect tight inventories and rising prices for both new and existing homes for the foreseeable future.”18


Builders (and buyers) did receive some good news in June, though: Lumber prices are coming down—although likely to remain above pre-pandemic levels for the foreseeable future.19


What does it mean for you?


Given the issues affecting the new-home market, it may make sense to widen your home search to include both new and existing homes. Your brand-new dream home may not be available, but you might be able to find an existing home that lives up to your vision. Keep in mind that we can help you find either a new or existing home and can advocate for you to ensure you get the best deal possible.



ARE YOU THINKING OF BUYING OR SELLING?


If you’re in the market for a home, you’re ready to sell your house or you’ve simply been wondering whether you should sell, you definitely could benefit from an expert to help you navigate the sizzling hot real estate market. Let’s set up a free consultation to discuss your situation. We can help you figure out your options and come up with a plan to capitalize on the value of your current property or to find your ideal next home.



Sources:

  1. The Atlantic -
    https://www.theatlantic.com/ideas/archive/2021/05/us-housing-market-records/619029/
  2. Wall Street Journal - https://www.wsj.com/articles/u-s-housing-market-needs-5-5-million-more-units-says-new-report-11623835800
  3. Time -
    https://time.com/nextadvisor/mortgages/mortgage-predictions-2021/
  4. Bankrate -
    https://www.bankrate.com/banking/federal-reserve/fomc-meeting-recap-june-2021/
  5. Mortgage Bankers Association - https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary/mortgage-finance-forecast-archives
  6. Associated Press News -
    https://apnews.com/press-release/globe-newswire/mortgages-mortgage-rates-business-0fc0360d0f4af0c988504385fa2794c3
  7. Realtor.com -
    https://www.realtor.com/research/june-2021-data/
  8. Home Buying Institute -
    http://www.homebuyinginstitute.com/news/home-prices-will-keep-rising-through-2021/
  9. DS News -
    https://dsnews.com/daily-dose/07-06-2021/record-high-home-prices-intensify-affordability-challenges
  10. National Association of Realtors -
    https://www.nar.realtor/newsroom/existing-home-sales-experience-slight-skid-of-0-9-in-may
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Could Rising Home Prices Impact Your Net Worth?

 


Learn how to determine your current net worth and how an investment in real estate can help improve your bottom line.


Among its many impacts, COVID-19 has had a pronounced effect on the housing market. Low home inventory and high buyer demand have driven home prices to an all-time high.1 This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.


If you’re a homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.



What is net worth?


Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.2


Assets include the cash you have on hand in your checking and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own.


Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.


How do I calculate my net worth?


To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth.


Total Assets – Total Liabilities = Net Worth


Ready to calculate your net worth? Contact us to request an easy-to-use worksheet and a free assessment of your home’s current market value!


Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.


As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your asset may be worth significantly more than it was this time last year.3


If you’re a homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.


How can real estate increase my net worth?


When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.


Property Appreciation


Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.


  1. Rising prices


    This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of record-low interest rates and limited housing inventory.At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.5


  2. Strategic home improvements


Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.


For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodeling the home to look like the Taj Mahal or a favorite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.


Investment Property


You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let's talk about how you could put that equity to work by funding the purchase of an investment property.


  1. Long-term or traditional rental


    A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.6


    As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.


  2. Short-term or vacation rental


Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travelers. And as more people start to feel comfortable traveling again, the short-term rental market is poised to become a more popular option than ever. In 2020 alone, in the thick of widespread travel bans, the short-term rental platform Airbnb’s market share of the hospitality industry reached as high as 41 percent.6


Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travelers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation.

To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.


 WE’RE HERE TO HELP


Ready to calculate your personal net worth? Contact us for an easy-to-use worksheet and to find out your home’s current value. And if you want to learn more about growing your net worth through real estate, we can schedule a free consultation to answer your questions and explore your options. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.



The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.



Sources:


  1. National Association of Realtors -
    https://www.nar.realtor/newsroom/housing-market-reaches-record-high-home-price-and-gains-in-march
  2. Forbes -
    https://www.forbes.com/advisor/investing/what-is-net-worth/
  3. The Washington Post -
    https://www.washingtonpost.com/business/on-small-business/your-net-worth-is-americas-secret-economic-weapon/2020/08/20/70df5b92-e2d4-11ea-82d8-5e55d47e90ca_story.html
  4. Bloomberg -
    https://www.bloomberg.com/news/articles/2021-04-09/home-prices-soar-in-frenzied-u-s-market-drained-of-supply
  5. Federal Reserve Economic Data -
    https://fred.stlouisfed.org/series/MSPUS
  6. Propmodo -
    https://www.propmodo.com/what-the-growing-short-term-rental-market-means-for-multifamily-real-estate/
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