Renters may soon get some relief. In the third quarter, apartment rents in some of the most expensive markets in the U.S. showed a decline. This marks a notable turn from the six-year boom streak occurring in the rental market, according to a new report released by MPF Research, an apartment tracker firm. MPF says a flood of new units hitting the market is one main reason behind the slowing of rents in some high-priced markets. http://realtormag.realtor.org/daily-news/2016/10/06/rental-market-shows-signs-cooling#sf38067327
Everyone wants to own a home. But if you don’t BUY RIGHT Home ownership can be blinding!!! I don’t know WHO advised the buyer of this deal recently. Take a closer look at the deal points:
3 Bedrooms, 2 bathrooms, purchased recently for $500K. The median house price for this zip code is $450K. This house is not remodeled and has an ugly old kitchen. Good bones, but there is nothing new about the house. Another words this house is already over median.
The buyer put down 5%. Financed the balance so they now owe PMI (personal mortgage insurance). Property tax will be 1% of purchase price in LA, so $5000 per year with 2% increases annually.
Since the borrower opted for a 30 year mortgage and put a minimum down payment into the deal, they were assessed an additional 0.85% charge. The APR of 3.13% with the assessed addition is now 3.98%. This all looks great, right?
The buyer believes the house will appreciate 5% for the next 3 years, to $578.8K. That’ a whopping $78K PROFIT RIGHT??? WATCH THIS:
Borrowed Amount: $475K
Interest to be Paid in 3 Years: $55.2K
Property Tax to be paid in 3 Years: $15.3K
Property Insurance to be paid in 3 Years: $1K
Total Paid by Buyer in 3 Years: $71K
The buyer after 3 years has put $571K into the house, even though they paid down part of the loan, they have still effectively PAID $571K. How much profit? $7.8K hopefully. WHY? because the buyer assumed a 5% increase for 3 straight years.
If the buyer is wrong in 1 out of the 3 years the profit is….ZERO!!!
So again I ask, would you have made this purchase???
Combining resources to acquire real estate sounds great, till you really consider ALL the considerations. I still meet investors who don’t use operating agreements with their partner/friends when flipping homes. This article addresses the “what if’s” in a practical sense.Buying Real Estate with a Buddy
August 2016 breakdown – California sales were down, median prices up = TIGHT SUPPLY! Anyone searching for a new home or searching for a rental keeps hearing this tune over and over; inventories are low. Additionally frustrating purchases might have also been talk of an increase in interest rates by the Fed in the Fall. We have continued to purchase homes at a steady pace but nowhere near our peak three years ago.
June, July and August are considered peak sales months for real estate so it is a surprise that sales cooled in July of this year. As VERY strong demand in rentals persists, this might be an early sign of buying demand weakening by California house consumers.
California real estate moves higher in June. Is the economy getting stronger or is lending getting easier?
Take a look! Home pricing is getting MORE expensive! The median price of a home has now reached over $500K statewide! What is driving the growth in pricing? Take a closer look! Sales of single family homes DECREASED from last year and the previous year! From my conversations more homeowners are staying put, making housing more scarce and driving prices of existing homes higher. Many homeowners are taking advantage of lower property taxes by holding onto what real estate they have instead up trading up or down. Questions? Email me for more assistance on how to buy or sell a home in this market!