This last part is just to summarize this series for you and add some additional info.
We believe strongly that everyone should aspire to own real estate in some form and it typically starts for people buying their first home to live in. It can also start by buying your first rental which is sometimes easier to “stick your toe in the water” first with. Institutional lenders typically don’t give “green” investors the benefit of offsetting their housing expense with rent though until they become a “seasoned investor.” Hence, it makes qualifying more difficult, as the investor has to count two housing payments (rent and the PITI + HOA payment) in their qualifying debt ratio. But that does not make it impossible to get in through this angle.
We discussed various methods of “getting into the game,” such as partial ownership situations (i.e., some form to Tenants In Common relationship)-co-buying effectively, taking existing loans “subject to,” Gifts from relatives, renting out rooms to minimize net housing costs, buying out partners you take on, building equity, etc. These are just some of the many creative ways to get involved with real estate that are “outside of the box.”
Some other comments to share with you before we end this discussion:
The safest real estate to buy: Residential SFR’s, duplex’s, tri-plex’s, fourplex’s, and condos in the entry to mid-level range, suburban near strong employment centers, interior of tract will minimal negative influences.
Affordability Index: Look at this in the area you are looking to buy in. When it gets lower than 20%, know some form of price correction is probably near, as the buyer vs. seller ratio is moving in the wrong direction. We have been in a sellers-market for quite some time now and that is why prices have jumped so much. While rates of appreciation fluctuate based on many different factors, historically, there is a slow creep upwards and no reason that won’t continue. It was hard to fathom that the houses I was selling for $80K to $100K back in the 80’s would be selling for 10-12 times that amount today.
Riding out the storm: There will be downturns in home prices, but there are more upturns and over time, prices rebound and then exceed their previous highs. The question is do you have the staying power to hold on to the real estate during the down turn and “ride out the storm,” so to speak? Bottom line is you should never buy real estate you cannot afford. This was one of the main causes of the real estate collapse that occurring during the Financial Meltdown from mid-2006 all the way through 2010. If those that lost their homes had borrowed responsibly, and they had the stomach to hold onto their property during this downturn and “wait it out,” they would have fully recovered their lost equity and reaped the benefit of the strong appreciation that had occurred since then. We have some grewat stories about homes we lent on, foreclosed on when they borrower defaulted, them being upside down, and us renting the properties out until the market rebounded, and then selling to get all our money back, etc. Hence, if you buy with a solid plan to hold long term, and know you can handle the housing expense during your hold period, you should have a successful real estate investment.
Hope all this feedback helps and “gets your wheels turning” on ways you can advise your kids and relatives how to “get into the game.” They won’t be sorry!
AS ALWAYS, WE ARE HERE TO STRATEGIZE WITH YOU WHEN YOU ARE READY.
Ken Thayer, ext. 209 Karen Gledich, ext. 241 Crystal Lopez Hyman, ext. 306