Real Estate

Becoming a Landlord is the best thing a Millennial can do!

By Matt Lambert

All of the ingredients needed for making a sound, long-term, and lucrative real estate investment are in the bowl.  If you are at a point in your life where there is more disposable income and words like retirement, 401k, defined benefits and IRA’s are becoming more common,  then adding real estate to your portfolio should be strongly considered.

Many Millennials claim that they prefer renting to keep things fluid and flexible.   This could also be partially PFSD.  Post Financial Stress Disorder.  Most of our generation was fresh out of college or just starting true adult life when the crash happened.  If the crash did not affect your personal finances there is a good chance it did affect your parents, siblings or extended family.  If this is the case, I encourage you to think again and address these fears with logic that can be found in data.

The crash was fueled by over-leveraging properties, non-existent underwriting, weak rental markets, higher interest rates, less focus on cash flow vs speculative appreciation and many other other things.  The fact is the market ingredients needed to make a sound investment are here now. Couple that with your growing financial responsibility and it’s time to become a landlord.

Have no fear, it sounds daunting and like a big pain in the a**… But, trust me, once you get rolling you realize it is easy and an amazing way to make your money work for you in a passive way.  Like the great Gary V says… passive income only exists in real estate.  Anywhere else it is a fairy tale.

The fact is, a few extra hours of work a year will change your life and financial future forever.

The key factor is smart leverage.  There are many different ways to approach this depending on your financial position.  I am going to approach this from two different scenarios, first being a couple who owns a home and wants to buy a larger home.  Second, being a single person who is deciding between owning and renting.  To make this less complex, I am going to leave out any sales fees,  taxes or penalties due upon liquidation of the investments.  There are many different ways you could approach this from a tax standpoint, which is a conversation with a seasoned tax advisor.

First Scenario:  Deciding Between Selling & Renting/Holding Existing Home: 

Tim and Tina bought a home three years ago.   They originally put down 10% ($20,000) on a $200,000 property.

Since then the property has appreciated enough to remove their PMI “Private mortgage insurance”. PMI is applied to mortgages with more than 80% loan-to-value at the close of escrow.  Tim and Tina locked in a good rate of 4.2% and currently have a monthly mortgage payment of $938.91 + $66.67 for homeowners insurance + $125.00 for property taxes. The grand total monthly payment is $1,130.58, a principal balance of $173,000 and a value of $240,000.

Tim and Tina have decided they need a larger home and want to move.  They have been saving money and are in a financial position to put up to $50,000 down.  They could sell and pay taxes on gains and put money into other investments or keep the house and rent it out.  Let’s take a look at the numbers.

Selling Home & Investing Money In Market. 

Tim and Tina decide to sell their home and buy a new one.

They list their home with EVOAZ.COM for 5%  and get it under contract for $240,000.

Fees incorporated

$240,000 x 5% = $12,000

Title Fees $2,000

Inspection repairs $1,000

Total fees $15,000

They Net $225,000

Total Proceeds $52,000

IF Tim and Tina Invested the entire $52k and they get 7% annually, it’s aggressive, but let’s roll with it for the sake of the example.

30 year Breakdown below.

15 year value $143,469
30 year value  $395, 837 

Rental Investment Route
Right now Tim & Tina could easily rent their currently home out for $1600 a month.  Let’s apply a 3% increase annually to all incomes and debts across the board. 

30 year Breakdown below

15 years value  $253,737
30 Years the asset/investment Value $779,643 

Possible Difference in 30 years
$383,806 more going rental route!! 

Second Scenario:  Deciding Between Renting & Owning. 

John is kicking a** at life.  He is happy and has a great job that allows him to work remotely.  This allows John the freedom to travel when he likes and not be tied down to one area.   This is a reason he wants to rent as there is no commitment and he can just move around and not be tied down. 

John has been saving money and just hit a bonus.  He has $25,000 to invest in his retirement and future. 

Market Investment Route 

He gives $25,000 for a 7% annual gain for 30 years. 

30-year break down below

In 15 years the $25,000 will be valued at $68,975
In 30 years $190,306 

Rental Property Investment Route 

John decides he is going to buy a house as a primary residence and has all intentions of living in it for 1st year. Then he will turn it into a rental property.   He also very much likes the idea of always having a home base and also likes the tax advantages of owning. 

Right now John could buy a home for $200,000 easily rent that home out for $1600 a month.  Let’s apply a 3% increase annually to all incomes and debts across the board 

30-year break down below.

In 15 years this investment would be valued at  $234,723
In 30 years  $732,068 

Possible difference in 30 years $541,762  going rental route!! 

Please remember these numbers and figures are very much pro forma and this is an investment.  We tried to take a conservative approach but we all know markets go up and down.  For a detailed personal application you must consider your specific market, target product, time frame, personal financial and credit standing.   The importance of aligning yourself with the right team is most important.  Please do not hesitate reaching out to us anytime for more information or guidance in this process:) 

Our Proven and preferred Team 

Ryan Gilliam Waterstone Mortgage
( Purchase loans, Refinance, Equity lines and credit repair )
https://gilbert-az.waterstonemortgage.com/RyanGilliam.htmlJames Laubham Capital Accounting
( taxes, payroll, accounting, Business development, estate planning )
https://www.capitalacctpc.com/

Matthew & Katie Lambert Team EVOAZ.com
( real estate services, Sales, rental, and development)
https://www.evoaz.com/long-term-investments

Ready to Sell Your Home? Know What You are Choosing

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by Susie Waggoner

When selling your home, you have many options.  One of those options is an investor.  Investors come in all shapes and sizes and call themselves by many different names.  Whatever they choose to call themselves, they are still investors, and as such, pay lower than market value for your home.  After all, if they weren’t going to make money on it, they wouldn’t buy it.

My sister has a friend who recently chose to sell her house to one of those investors.  She needed to move quickly, and so she found the choose-your-own-closing-date, no-hassle, no-open-houses, no-blah-blah-blah option appealing.  Being a previous realtor and now in the lending industry, she was not shocked that they offered her approximately 80% of the home’s market value.  What was shocking was when in the 10-day inspection period, you know the period where the buyer can back out for any reason or no reason at all, they came back with a list of items they wanted repaired and the cost to repair them, what they called “deferred maintenance” of $90,000 to replace the roof, the AC, and other various repairs including the cost to update.  Thankfully, because of her previous experience, she was able to negotiate that list and ended up paying $16,000 for the deferred maintenance.  That amount came off of their original purchase offer, so she ended up selling her house to them for much less than she could have sold it otherwise.

When selling your home,  it is important to know what you are choosing, and have someone who knows the ins and outs of negotiating a purchase contract and who has your best interest at heart.

Visit Susie’s Website: https://susanwaggoner.exprealty.com

The Post-Divorce Financial and Legal To-Do List

Photo Credit: edar,  Pixabay

Photo Credit: edar, Pixabay

Blog written by: Jim McKinley
jim@moneywithjim.org | moneywithjim.org

Divorce is typically a long process that’s full of paperwork, meeting with lawyers, and other legal undertakings. Once your divorce is final, you’re ready to finally relax and be done with it all. However, there are a few more steps you need to take to tie up any financial and legal loose ends from your married life.

Steps You Can Take on Your Own

If you want to change your name, that’s a good place to start. You’ll need to change your name on your social security card, driver’s license, bank accounts, and insurance policies. Don’t forget to alert creditors of your name change.

Cancel or suspend all joint accounts. This includes bank accounts and credit cards, including all store credit cards. If you don’t, your ex-spouse could run up charges on credit cards or overdraft a bank account, and you could be held responsible for repaying the debt. It could also harm your credit score. Usually, the balances need to be paid off immediately in order to cancel the account. If you can’t pay the balance to cancel the account, you can suspend the account so that no future charges can be made.

Once you’ve closed joint accounts, you’ll need to open new accounts in your name. “Depending on the situation, it may make sense to apply for new credit cards before you cancel joint accounts,” suggests Divorce Magazine. For example, you may need to use a credit card as a small loan to get back on your feet after the divorce. Besides new credit card accounts, you’ll need to open new bank accounts, investment accounts, and more. Make a list of all of the accounts you had while married and replace them as soon as possible.

Consulting with a Lawyer

Changing the beneficiaries on your accounts is perhaps one of the most important steps to take after your divorce is final. Typically, it’s a straightforward process that can be done with a simple form. Without changing beneficiaries, your ex-spouse could inherit your assets when you pass. Some experts suggest also creating a new living trust and naming the trust as the beneficiary, especially if you have minor children. Otherwise, if your children are named the beneficiaries and are minors when you pass, the court may name your ex-spouse as their guardian, which means he or she may have control over their assets.

Update or create a financial power of attorney and a health care power of attorney. Assign someone as the executor of your estate and list who you’d like to receive your property and assets. Don’t forget to re-title assets in your name. For example, if you owned your house with your ex-spouse, you would need a quitclaim deed to remove his or her name from the title. Quitclaim deeds are an ideal and effective way to transfer ownership of property when the property isn’t being sold, so no money is involved. Before signing or accepting a quitclaim deed, consult with a qualified attorney. Also, speak with an attorney regarding updates to your will and changes in beneficiaries.

Look for a New Living Space

In the event that the marital home must be sold or that you no longer wish to live there, you’ll need to start looking for a new place to live. In the interest of time and to expedite the process, it might be worth looking into a short-term rental until you can get your bearings. Many apartment complexes offer 6-month leases. This will give you a chance to find a space of your own with time to look for a long-term alternative.

Regardless of whether you choose an apartment or buy a house, you’ll need to move your belongings. Consider hiring movers to help you quickly and efficiently get your possessions from point A to point B. Hiring professionals will also save you the awkward, potentially contentious experience, of having to see your ex more than is necessary.

Meeting with a Financial Advisor or Accountant

As soon as you can, meet with an accountant for a new tax projection based on your income and deductions. You may need to change your withholding, pay more or less estimated taxes, and change your investments. You don’t want to owe money next tax season, nor do you want to overpay too much in taxes. Also, meet with a financial or investment advisor to evaluate your investments. Investments that made sense when you were married may no longer be smart choices.

The list of what you still need to do may seem long and overwhelming, but focus one task at a time until you’ve accomplished them all. Prioritize the list and take on the most important steps first, such as renaming beneficiaries and choosing a new power of attorney. Completing the to-do list will provide you with assurance that you have control in this new chapter of your life.

Home Appraisal 101

Team EvoAZ’s Jen Duncan is joined by our preferred Mortgage Lender, Ryan Gilliam from WaterStone Mortgage, and Gabe and industry expert mortgage home appraiser to share the in’s and out’s of the appraisal process.