Local Real Estate Comments and Ramblings

“I was going to pay cash but my financial adviser said to get a mortgage …. I need the tax breaks”

OK, I’ll admit that I don’t have this conversation very often since most of my buyers do not have the choice to pay all cash for their next home.  But I have in fact had the conversation a few times.

Not too long ago I had a client who brought up exactly this point. We had an accepted contract on a bank owned home in which the buyer had made an all cash offer.   

The client wanted my advice and wanted to know if they could go ahead and get a mortgage even though they had offered cash.

First of all, yes they could obtain a mortgage if they chose to.  The fact that the offer was all cash doesn’t mean they can’t get a mortgage.  However it does mean that if there would have been any glitches in obtaining the mortgage the seller didn’t care.  The buyer would still be expected to close as contracted.

But the real question is why would somebody want to get a mortgage when they could pay cash instead?  The answer of course is those mysterious tax advantages.  So I asked the client a series of questions.  I am a big fan of Dave Ramsey so I was pretty familiar with the questions.

*Your last home was paid off or nearly paid off before you sold it.  Did you feel compelled to go get a mortgage to go in to debt on that home?   No

*If you were to get a $100,000 mortgage on this new home at today’s rates you pay about $5000 in interest.  If you are in a 30% tax bracket you’ll save about $1500 in taxes.  Is it worth going in to debt $100,000 to save $1500 per year?  No

*Is worth paying $5000 a year to the big monster mega bank mortgage company to avoid giving $1500 to Uncle Sam? No

*(this was my favorite ..) If you gave $5000 to your favorite charity instead of to the big monster mega bank mortgage company wouldn’t get exactly the same tax break? Yes

OK so I’m financial planner or adviser, I’m just the guy you hired to represent your best interests on your home purchase. I don’t really understand why it would be better to go in to debt instead of paying cash!  Ultimately the decision is yours but I think your adviser needs to give you a good explanation of why you should get a mortgage.

About an hour later they called back.  We decided to go ahead and pay cash for the house.

Under our current tax codes we are allowed to deduct our home interest from our income. But that doesn’t mean we should go in to debt just to get a tax break. And this doesn’t only apply to paying cash.  How about paying it off early or getting a 15 year mortgage?

That’s my opinion, How about yours?

Check out the Dave Ramsey Fan Group on ActiveRain

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

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OK, so my daughter calls me this morning about 8:30 and says, "Oh yeah, you're invited to our inspection thingy today.  It's at 10:30 on the visitor side of the football field.  You don't have to come but you're invited"

Aaaaahhhh, kids. Of course I would love to be there!

The "inspection thingy" was the Annual Personnel Inspection and Pass-in-Review for the McEachern High NJROTC program. It was a beautiful day and a great experience to be there. What a truly outstanding group of young people!

The day was made even better when tori recieved a rank advancement (which she knew about but I didn't) and then she was surprised with a second award for having an outstanding uniform! 

See all the photos in my Facebook album!

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

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I hope to own a home one day...

Should I do a lease purchase?

I get this question all the time from prospective buyers who are looking for a way to become home owners.  They see this as path where at least something they pay every month will go toward owning something.  They pay a little bit down and pay a little extra rent each month and in return the seller will give them credit toward ownership or down payment.  From a contractual standpoint there are actually a few different ways to do this but for this discussion I am sort of lumping them all together. From the buyers standpoint lease purchase, lease option, rent to own, or any of the other various agreements all represent the same thing.

So, should a prospective tenant/buyer enter in to this type of agreement?  If I am advising the buyer then almost always, my answer is NO!

Why not? Well, the main reason is that most of them never end up closing as a full fledged sale.  The buyers end paying a bunch of extra money and end up with nothing.  Sometimes it's because the buyer ends up not being credit ready, sometimes they don't like the house or neighborhood, or maybe it turns out the house was overpriced and won't appraise for the agreed price.

In the last year or so I have seen another, scarier reason popping up.  SELLER DEFAULT. The sellers collect the rent and purchase consideration but default on the mortgage payment attached to the home. The home goes to foreclosure and the buyer loses everything they have put in toward future ownership. In this situation there is very little the buyer/tenant can do.  I suppose they could try to sue the seller/landlord but good luck with that. The real answer is that the buyer/tenant loses their money.  Unfortunately I am getting more and more of these calls as well.  Many of the buyer/tenants have paid out thousands of dollars and now they are losing it all.

Instead of paying in to a "savings account" with a perfect stranger, open a saving account with a local bank.  That way you are in control of the money and not your landlord!  Rent a home and put the extra money in to your own savings each month.  If you want to be a home owner then you need to be responsible and don't leave the responsibility to the seller/landlord.

My general advice is to not intertwine the lease and purchase at all.  If you are not ready to buy then just rent and leave any purchase intentions alone.  Save your money and work on your credit.  When you are really ready to buy you will have a choice of any property in your price range instead of the limited pool of lease purchase homes.  You can pick any home you want instead of being tied to the home you rented in the hope of owning.

When should I do a lease purchase?  I'm not 100% opposed to the concept, I just think that in almost every situation it is not the right type of arrangement for the buyer.  If the amount of rent required is the same either way ( no added rent toward purchase), and if the amount of upfront money is small enough that that you are perfectly willing to lose or walk away from it, then maybe.  Remember that your choices of homes will still be limited.  Another situation that may be OK is if you have good credit but need to wait a short time to buy.  Maybe until your previous home sells or you get a year end bonus.  

Another scenario that might be OK is if it is truly an option to buy situation and you have posted little or no extra money.  If you have little or no financial risk, and you have a choice to buy or not, and the price is fair, then there would be little reason not to take an option to purchase.  

The bottom line ... if you are not ready to own - then rent.  Save your money and pay your bills on time.  In no time at all you'll have down payment saved up.  FHA only requires 3.5% down.  If your rent and bills are paid on time for 1-3 years you should have no problem qualifying for FHA and you get your choice of homes.  You could be a home owner much sooner than you might think.

That's my opinion, I would love to hear yours!

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

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 Yes I love my wife .....

We have both been working like crazy and we definitely don't get to see enough o each other.   Sometimes we even have to resort to communicating by notes or email  :-(

Anyway, the other night she was leaving me a note with a few things to do the next day and added .. write me a love poem.  OK, I am absolutely no poet but I thought it was a wonderful idea.  Well, it was a wonderful idea until I tried to implement it.  It just kept sounding like Dr Suess loves Barbara.

I didn't want to entertain or humor her.  I wanted to make a serious statement about how much I really love her.

She mentioned today that if I didn't finish the poem it's OK since I'm not  not much of a writer.....     

LIGHT BULB!  

I might not be much of a poet but I do write an occasional blog!  And when I blog it goes to the WORLD WIDE WEB  for every person on the planet to see! It goes on Twitter, It goes on  FaceBook, , It goes to ACTIVERAIN.

My blog goes everywhere, and everywhere it goes I can proclaim .. I love my wife!

                                                                                                                                (Flicker Creative Commons kaibara87's photostream)                     
                                                                                                                                                                                                                                                                                                                                          

Every breath I take ... Sting beat me to that one
How do I love thee, let me count the ways ... great poem but somebody already did that one too.

No,  I'm not a poet and I really know it .... Ugh, see what I mean?

What I am good at is being in front of the crowd, live or on the 'net and speaking from my heart.  So there is nothing poetic about it, but for all who see this ...

I love my Wife!

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

 

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Sometimes the best blog answers make the best posts.  The question was posted over on the Zillow boards about where an individual should invest $20,000 if they have it to invest.

Here is my answer ...

Carlton,

Any investment should be looked at as a long term investment.  That goes for real estate, stocks, or anything else.  If you don't have the stomach for the current roller coaster then stay in cash. 

Don't invest in anything you don't understand.  Some people understand the stock market and I think most people have a decent understanding of residential real estate.

Owning Real estate as an investment is very hands on.  There are tenants and maintenance issues to deal with. But you should get a higher return on real estate.

Why?

Real estate is I.D.E.A.L

I-  It provides INCOME from the rental.  That income can cover all or most of the ongoing monthly cost of ownership.  The tenants end up paying for your home

D- DEPRECIATION - In todays market some of the depreciation is real.  But really this refers to the many tax advantages of owning rental property

E- EQUITY is built up over time as you make payments.

A- APPRECIATION Over the long term real estate DOES go up in value. Remember that you need to be in any investment for the long term.

L- LEVERAGE -  Your $20,000 can buy you $20,000 worth of stock or make a 20% down payment on a $100,000 home.  5 years from now if both have gone up by 10% then you made $2000 on the stock or $10,000 on the $100,000 dollar house.

So for stock to do what a real estate investment does for you
1.You would buy the stock on a 20% margin and finance the rest
2.The stock would pay dividends high enough to cover all or most of the financed payment
3.Your balance would go down each month on the financed amount
4.Uncle Sam would let you write off the interest and other expenses
5.The stock would go up in value over time.  Of the five this is the only one that is realistic.


So invest $20,000 in a $100,000 home and deal with tenants, vacancy, and management.  If it goes up by 10% in the next 5 years you make $10,000 plus any equity build plus any tax advantages minus any management or vacancy costs.

Invest $20,000 in the stock market and it goes up 10% in the next 5 years and you make 2,000 with no real headaches.

Ultimately that is a personal decision that you need to make yourself.  I know which way I would lean!

Call if I can help.

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

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NEW LISTING: 3253 Woodcliff Way, Powder Springs, Ga. 30127

3253 Woodcliff Way

Location: Country Walk

ENJOY THE OUTDOORS:
And get your exercise on the recreational trails, pool, and tennis courts just a short walk from this traditional home in Country Walk. Has 4 bedrooms, 2.5 bathrooms, master suite with dual sinks, separate shower, his-and-her closets, casual living room with carpeting, fireplace, tasteful dining room, sunny kitchen with appliances included, Corian countertops. Recent HardiPlank siding and roof and brand new interior paint and carpet. This home is move in ready and waiting for you to call it home!

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Bob Southard

Bob@AgentBobSells.com

770-656-9134

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Pricing

Price: $180,000

Additional Pricing Information: First time buyers - Welcome!

Property Location

3253 Woodcliff Way
Powder Springs, GA 30127
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Bedrooms: 4

Bathrooms: 2.5

Parking Spaces: 2

Year Built: 1988

Subdivision: Country Walk

Garage Size: 2 CAR ATTACHED

School District: COBB COUNTY

Square Footage: 0

Agent Name: Bob Southard

Broker: Solid Source Realty

MLS #: 3863288

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Range/Oven

Full Refrigerator

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VFLYER ID: 2302466

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Country Walk is a fantastic, active, swim/tennis neighborhood located in the heart of Powder Springs, Ga.

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Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga. Call me for all of your real estate needs.

Visit my website

Call me for all of your Real Estate needs

770-656-9134

Copyright © 2008 By Bob Southard, All Rights Reserved

 

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