It’s Not an Investment

Scrolling through your news feed, you might have noticed a couple articles here or there that states “buying a home is not an investment” or that “home ownership is not part of the American Dream anymore”.

It is very good to broaden your thoughts and challenge what you know to be true. But lets look into the points that are made on these articles and think it through for someone considering buying in our market, Huron, SD.

Let me summarize these articles for you.

Investments make you money, not cost you money.

 

But isn’t it true that if you were to invest in the stock market, it would actually cost you money? Often when investing you would contribute monthly, even. What’s the difference?  You will not find an investment that doesn’t cost you money. The very definition of investment is “The action or process of investing money for profit or material result.”

After cost of maintenance you will end up paying more than renting.

 

This of course is different for every single house purchase. But if you buy a house in disrepair you can get a good deal on it!

Lets look at an actual situation that happened in Huron recently.

A landlord bought a house for $29,000. It looked really bad. The siding was falling off, it was dirty, had a bad central air unit, broken windows, etc. The landlord puts less than $4,000 into the house and 2 months later had tenants renting it for $650/month.

Hypothetically, the tenant could have bought the house and fixed it up. If they did that they would only have to pay $250 a month instead. That would have been a savings of $400 a month.  Now I’m sure the landlord will have to go in and fix things on occasion. $100 here, $200 there. Over 5 Years how much do you think the maintenance would cost? Over 24,000? Of course not! But that is the break even point.

If you over pay for a house that needs a lot of work, it is possibly a bad investment. But realistically, you will pay less for a house you own then a house you rent in the Huron Area.

Who wants to go to jail for 30 years? You can be mobile and nimble if you rent.

This is an actual statement pulled from an anti-home buying article. This is very misleading. Signing up for a 30-year mortgage in no way obligates you to stay in a house for 30 years. It is just a payment plan that guarantees your interest rate for 30-years, and if paid consistently every month, it will be the end of your mortgage.  That is a very long time, so please see attached inspirational quote by Earl Nightingale. If during this time your home needs change you can always sell and buy somewhere else.

Image result for time will pass anyway quote

 

 

 

The American Dream

Have you thought much about your goals and dreams lately? Where would you like to be in 5 years?  Take a moment and actually think about that.

Would you be happy if you were in the same exact spot, but 5 years older? If not, what would you like to see change? Would you like a better job? Would you like a better home?

Why not strive for it? We live in a great country. And if you work hard, are determined, and have initiative you can achieve anything. That is the American Dream.

No matter what that dream is, whether it is home-ownership, having a successful business, or retiring in Florida, you can start your path there today.

Here are a couple reasons Home-ownership is part of the American Dream, and it can be part of your dream too.

  • It doesn’t matter how old you are. As long as you are an adult, finances permitting, you can buy a house.
  • Financing makes home-ownership more realistic for the common person.
  • You cannot be kicked out of a house you own, as long as you make the payments you will have stability.
  • Owning a home is like a savings plan. You will build equity over the years, to cash out of or to pass on as an inheritance.
  • You make your rules. You can have pets, or not. Paint your room whatever color you like, change whatever you want, and play the drums as loud as you can.
  • Rent prices will likely rise but your fixed mortgage will not.
  • Someday the house will be paid in full. No more mortgage!

Here are a couple steps to get going in the right direction.

  1. Start Saving – You will need a down-payment. If you don’t have any extra monthly income to save, cut back on what’s unnecessary. Stop buying things, and start selling things. Get rid of cable. Drive around an older, cheaper car. Be creative and you will find some money to tuck away.
  2. Build your Credit – Keeping a Credit Card paid off, and having a contract cell phone will help build credit if you have none. But don’t fall trap and get into debt. That will hurt your chances of qualifying for a loan.
  3. Build Relationships – It’s never too early to start talking with a loan officer and a real estate agent about your goals. Building good relationships with these people can benefit you greatly. A loan officer can give you more specifics on what you need to qualify and can alert you to lower interest rates or changes in loaning guidelines that will affect you, while a Realtor will be able to alert you to a particularly good deal that comes on the market.

If you would like to start the conversation of home-ownership with a Realtor, feel free to contact me. Angie Uttecht 605-350-2553

But is it really a good investment?

On the internet you can find every type of article. Why eggs are good for you and why they are bad for you. Evidence taken from the same studies but with different points of view. This is true about every topic imaginable. What about real estate? Is real estate really a good investment and why do so many people choose to never buy a house?

What you will find is a lot of people who are in a city telling you that real estate isn’t what it’s cooked up to be. They will tell you that it is actually cheaper to rent and that the equity you build is nothing compared to being able to skip town on a drop of a dime.

And in many areas of the country they are right. San Francisco for example has average rent of a 2BR at $4126/month where the average 2BR home value is 1.2Million. That is a mortgage payment of roughly $8,000/month including property taxes. So buying in San Francisco was a good investment in the past but being a new home owner will cost you almost twice as much as renting.

How about in Huron, South Dakota? Is it really a good investment?

Here are the numbers: Rent for a 2BR is around $600. You can buy a investment quality 2BR home for around $45,000. The mortgage, plus property taxes for that is around $330.  But you wouldn’t buy a investment quality home. You could afford  $82,000 home for the same monthly payment of $600/month.

Houses in that price range have a lot more going for them. Many have 3+ bedrooms and garages.

So, even though it is true that in many parts of the county buying a house isn’t worth it, that isn’t the case for Huron. You will be living with a lot more for your money AND build equity.

Where does SD rank for best retirement state? You’ll be surprised!

It ranks #5! 

According to kiplinger.com our beloved South Dakota is ranked in the top for retirement friendly states. Their reasons are as follows:

  1. There is no state income tax so Social Security benefits and other retirement income are not taxed.
  2. Cost of living is low.
  3. Percentage of the population over 65 is above the national average with 14.5%
  4. Sales tax is relatively low.
  5. SD offers many home-owner benefits for Seniors including tax freezes, property tax reduction, and property tax homestead exemptions. Property Tax homestead exemption is for homeowners 70 or order or a surviving spouse. This allows them to delay paying property payment until the sale of the property.
  6. There are no inheritance and estate taxes.

The only states that rank better than SD for retirement are Delaware, Florida, West Virginia and Pennsylvania.

Our neighbors, Nebraska and Minnesota, are among the worst states for retirees along with North Carolina, New York, New Mexico, California, & District of Columbia.

So why not move all your older relatives to the wonderful state of South Dakota!

Click here to see the full report and how every state ranks.

2 things you need to know about your loan

During a home purchase it might feel like you are being guided a little too well and aren’t making any decisions for yourself.

You have options! At least, you probably have options. A loan officer might just sign you up for a 30-year fixed loan without asking you if that is what you wanted. There is nothing wrong with 30-year loans. But understanding and deciding for yourself is a good idea. Knowledge is power.

Understanding the difference between 30-yr and 15-year mortgages.

30-Year Mortgage Pros: 

  • Lower Payment! Stretching the payments over this amount of time will result in significantly lower payments every month. You can expect to save $220/month on a $100k loan.
  • More buying power. A $244k house with a 30 year mortgage has very similar monthly payment to a $167k house with a 15-year mortgage.

15-Year Mortgage Pros:

  • Lower Interest Rate. 15 year mortgages have significantly lower interest rates than 30-year mortgages. If a 30-year rate is at 4.12%, you can expect a 15-year to be at 3.36%. That means less money is going towards interest and more towards paying off the house.
  • Quicker equity growth. The higher payment and lower interest rate goes to good use and pays off your house 15 years earlier!

Understanding the difference between fixed rate loans and balloons.

Fixed-rate: Your balance will be paid by the end of the term. That is the way they are constructed. If you have a 15 or 30-year fixed mortgage you can keep that loan, at that interest rate, until the entirety of your loan is paid.

Balloon Mortgages: Balloon mortgages require your balance to be paid in full at the end of a short term. Typically 5-years. If you don’t have the money to pay it off, you will need to refinance. The risk here is that there is no guarantee interest rates will be reasonable in 5 years.

If you are only offered a Balloon Mortgage, shop around! There might be another bank that will loan to you on a fixed-rate!

Ready or Not? When to consider buying a home.

Let’s be honest. Buying a house is NOT for everyone. There are a great number of people who shouldn’t be buying a house right now. It is imperative to know not only if you can, but if you should be purchasing a home.

Many people have home-ownership goals, and that is fantastic! But yet home-ownership doesn’t fit well with their current lifestyle.

Example 1: If you are a college student in a large city somewhere, you can only find a place to rent for $1100/month. But if you were to buy a condo your payment would only be $750 a month. This is understandably tempting, but if you only plan to live in that area for another 2-3 years before you sell it, you won’t be able to re-coop the closing and Realtor costs. This situation will more than likely just add expenses and headache. Someone in this situation probably shouldn’t be buying right now.

Example 2: You are single, have college debt, work for minimum wage, live with your parents, and have no savings. You would like to start feeling more like an adult and move out of the house but there isn’t a lot of affordable rentals. You find that you could purchase a small home for a monthly payment of $400. If you can get the financing, can afford the payments and plan to live in the area for a while, it isn’t the WORST idea. But first consider the possibility of staying with your parents longer and paying off the student debt. It will also allow you to be more mobile if a job that uses your degree is available in another town.

Example 3: You are planning on staying in the town for the foreseeable future, you live paycheck to paycheck paying $700/mo rent. You find a $40,000 house that fits your needs and you are pre-approved at the bank. The payment on this house will be around $300/mo so you should have plenty to spend on repairs and updates. Maybe even grow a healthy savings and upgrade to a bigger, nicer house someday.

Example 4: You have a steady well-paying job, good credit, and some savings. You know you want to live in the area for quite some time. And home-ownership is on your mind? Go for it!!

Home-ownership can be a wonderful, helpful, and important life changing decision. It can even be the key to financial stability. But only if it is done responsibly during the right time in your life. Otherwise, sadly, home-ownership can be burdensome, risky and end in foreclosure.


 

If you want to pursue home-ownership, please contact me. Angie Uttecht 605-350-2553 angie@soldbyangie.com

 

 

Fixer Uppers — Is it a Good Deal or a Money Pit?

If you have been browsing through houses online and you found an under priced house that is a fixer-upper, you might have found a bargain! The other reality is that it could be a money pit.

Here are some questions to figure out before making an offer:

  1. Is it just ugly? or does it have bigger problems?  Old carpet, cat urine smell, ripping wallpaper, chipping paint, no problem! Not to say that it will be cheap to replace carpet and paint but it is a cost that you can easily calculate and decide if it is worth it. You can get a really good deal on a nice house if you are willing to use some elbow grease.
    Leaking roof, missing siding, broken furnace, missing plumbing? Now this is a problem. This is not a property to jump on. Take your time. You will need to get estimates to fix each of the issues. And plan for it being twice as expensive. If you believe its still worth it, then go for it. But don’t expect to be able to move in quickly!
  2. Always stay in your comfort zone. This isn’t usual advice but when it involves this much risk you need to know what you can handle. If you aren’t comfortable with a deal it is likely that you aren’t understanding everything that it will involve. And a miscalculation can be very very spendy!
  3. Have the money to spend. Make sure that you have your finances in order. If you can barely make the down payment, how will you afford the repairs? If you can’t move in until the repairs are done, you will be paying insurance, utilities, and interest on a property that you aren’t living in. If you are going to be taking a risk, make sure you can handle your worst case scenarios.
  4. Have a backup plan. In the worst of cases what will you do? Your Plan-B doesn’t have to be spectacular, make you money, or be convenient; but you should have one! Can you easily resell the property as-is for what you paid? Can you live in the house before repairs are made? Just as long as your plan isn’t to skip town and let the home be foreclosed on!

    If you need my assistance please don’t hesitate to call, Angie Uttecht 605-350-2553

Don’t Wait Until Spring– Now is the time to buy!

I’m going to go ahead and assume that the average person wouldn’t prefer to haul their belongings into their new house during the winter. Of course they would prefer the spring! Since nearly everyone thinks like this, there are a plethora of home buyers ready to pounce at a good deal when the weather warms up.

But you can beat the rush! There are still a good amount of nice houses to choose from on the market. Many of them have been on for quite a while and are ready to accept a lower offer.

Another reason to buy this winter is low interest rates. There really is no promise on when the interest rates will rise. But one thing we know historically, is that interest rates are REALLY low!

If interest rates rose even 1% on a $180,000 house, you will pay an extra $107 a month. Over 30 years that is an extra $38,520.

Now I don’t know how valuable it is to you to un-pack in your flip-flops… but if you are financially ready to buy a house now, do it!

How will Student Loans affect the Housing Market?

Here are some statistics to think about.

  • The average graduate of the class of 2015 has $35,000 in student loan debt.
  • Since 2010, 40% of households under 35 had a student loan.
  • The average American household with at least one credit card has nearly $15,950 in credit-card debt (in 2012), according to CreditCards.com, and the average interest rate runs in the mid- to high teens at any given time.

When a lender looks at debt, they see it all the same. A $260/month student loan payment is looked at in the same light as credit card debt or a car payment. If someone has all three debts, getting a mortgage can be a very difficult task.

Because of this increase in debt, for the first time ever, young people who did not seek a college education are more likely to buy homes than their college educated peers.

This is bad news for all homeowners looking to sell a home. If there are less young people who are looking to buy small and inexpensive homes, it will be harder for those trying to sell to move up. The ripple effect continues as those selling medium priced houses will have less potential buyers because they are stuck in their entry-level homes.

The twist? According to NAR, 88% of Millennials home purchases have been for houses over $100,000. And 45% of Millennials pay over $250,000 for their first home.

 

First-Time Homebuyer Benefits

South Dakota has some great help for first time home owners. Benefits include low-interest fixed rate mortgage loans and cash assistance for homebuyers purchasing their first home.

Qualifications:

  • Must be a first time home buyer. This includes anyone who hasn’t owned a home in at least 3 years. Mobile Homes owners are also eligible to apply.
  • Must be within the income limit for your county. For Beadle County, two or less people can’t make more than $64,700, 3 or more can’t earn more than $74,405.
  • Purchase price of the house can’t be more than $250,200

Down-payment Assistance: You can get up to 3% as a gift to help with the cost of your mortgage. The gift never needs to be repaid but you will have a higher interest rate. Lender Search>>

If you have questions please go to the SDHDA website and if you would like to continue the process give me a call/email and I would be happy to help you find a home!

Angie Uttecht 605-350-2553    angie@soldbyangie.com