Potential Buyers' Fears Addressed

by Ellen James Martin -

Oct. 12, 2008 12:00 AMUniversal Press Syndicate

They are a couple in their early 30s. They have stable jobs, a down payment in the bank, and an intense desire to escape their cramped apartment for a home of their own.

In fact, the couple have already picked out their ideal property - a sprawling ranch-style house on a full acre. Plus they are convinced this is an opportune time to buy.

Still, the couple are racked with doubts and have yet to make a serious bid on the property. Are they crazy to consider buying in so tumultuous a real-estate market?
Read more...



Richard's opinion


The stars are aligned for Buyers with plenty of homes for sale in good condition, at low prices, and with low interest financing. You may be saying..." Great, but the market is bad. Home prices are still falling and they may fall a lot more in the next few months, so why rush? I'll wait until the prices are at rock bottom. If I buy now I may loose my money." That is a seemingly logical thought on first view. You will only know when the bottom is hit when the market starts going back up, so timing is going to be pure luck.

To evaluate whether that is true for you, you must check your numbers.

RENT- How much am I paying? Will it go up? By how much? How many years have I been renting? How much total money did I spend on renting in my lifetime so far (this shocks most people)?

TAXES- How much did I pay last year? How much will it be this year (estimate)? Do I have any tax breaks (ie: IRA, 401K etc). If I have an IRA, 401K etc, how is it doing in the stock market right now? Did I loose any money? If so, how much? Do I want to put all of your eggs in one type of investment basket?

Now that you have checked your numbers, you are now ready to figure out why owning your own home now may really be the smart move right now. Here are some advantages of home ownership:

LEVERAGED ASSET

This means that owning a nice 3 bedroom, 2 bathroom, home with a 2 car garage, fenced yard in a good area worth $250,000, may require a down payment of 3% of the purchase price ($7,500.00) and maybe closing costs of 2% ($5000.00- but I have had success on getting sellers to pay this for buyers). To have $250,000 of assets in your IRA, 401K mutual fund, you need $250,000. You also can't live in your mutual fund or stocks.

TAX SAVINGS

For a 30 yr fixed interest rate loan of $250,000 @6% with 3% down payment ($7500.00) your monthly payment would be $931.42 plus property tax (deductible) and homeowner insurance. For someone in a 25% federal tax bracket savings would be about $232.82 per month/ $2,794.26 per year. Your net monthly payment to own your home would be about $698.60 plus property tax (deductible) and homeowner insurance. You will also save more money on your AZ State income taxes too.

LOAN REDUCTION

Each payment reduces your mortgage balance on what you owe.

APPRECIATION

As the real estate market goes up in your area, so does your home values, and without having to do anything to your home.



That is the one-two-three-four knock-out punch of the advantages to your personal wealth building by owning your own home. At any given time, some or all of these four parts are working in your favor.


There is a # five punch.... Investor Benefits

That is what your landlord investor is doing by charging you rent every month. After you own your first home to live in, if you bought one or more other homes for investments, you would be receiving the rent and getting even larger tax breaks from the Government and even more money in your pocket. That is for another blog post.



To get your personal RENT vs OWN comparison, contact me today.



***Consult your financial advisor for financial, legal, and tax advice.

Happy House hunting!



Richard