Real Estate and Hand Grenades

The older I get, the more certain I am. 

            Timing is everything. 

            Whether you’re proposing marriage to the love of your life or throwing hand grenades, timing matters.

A lot.

So, if the number one rule of real estate has always been location, location, location, the second rule should be timing, timing, timing. Sometimes I wonder if they should switch places.

Let me give you an example.

If you wanted to buy a house in the last couple of years, you probably talked yourself out of it.  With the television news throwing terms like “real estate bubble” and talking about prices “bottoming out” who could blame you?

Did it matter at all where the house was located?

Nope.  Not one whit.

“It Would Be Nice if Something Made Sense Here.” Alice in Wonderland

            Does anyone really know what a “real estate bubble” was?  Like a lot of terms used by the media these days, it sounds cool, but it doesn’t exactly explain the situation.

Maybe it's tiny little houses… trapped in soap bubbles… floating over the land --and Pow! -- They fall to earth. 

            I suppose that could be the “bottoming out” part.

         

But, I digress.

            Timing has always played an important role in real estate, but never more than in today’s market.  As a matter of fact, with interest rates at an All Time Low (according to the commercials), it would be surprising if you hadn't wondered if you could buy a house.

            So, let’s try to make sense of whether now might be your time.

If you’re renting and have been for some time, you’re probably spending a sizeable amount of money.  A 3 bedroom/2 bath (in my area) is likely costing somewhere between $850 and $1500 per month – or more. 

Everyone knows you could easily buy a house for that payment per month.

The question is, is this the time to rent, or to buy?

Spoiler Alert! Buying Is Not Right For Everyone…

This is a real estate blog, so this might come as a shock to you, but buying is not always the right decision.

Real estate is the biggest single investment most people make.  Don’t buy unless you’ll be in the house long enough to recoup your expenses (closing costs, down payment, etc.) 

However, that will take much less time than you think.  Most people can break even in three to four years. 

Honey, You Have Issues.

            It should come as no surprise that credit issues will prevent you from being able to buy a house.

            If you’ve just gone through a bankruptcy or foreclosure, buying is probably not on the table right now.  But it will be.  Even bankruptcy won’t prevent you from eventually being able to own your own home. 

            If you’re one of those people who just “assumes” you can’t buy because your credit probably isn’t good enough, do yourself a favor. Go see your local lender.  The “local” part is very important. Trust me on this. Getting a pre-approval for a mortgage is a simple process. 

And if you find out you’re not eligible right now, you’ll also find out what to do to turn that situation around.

           

To Buy or Not To Buy… That Is the Question.

            The other side of the coin is that buying is right for many, many people.

           

            *Anyone who has a credit score of at least 640

            *Anyone who is settled in their job and plans to stay in their community

*Anyone who is interested in investing in one of the most reliable investments of all time. Warren Buffet, Dave Ramsey and many more have continued to invest in real estate -- even during the “bust”.

           

Show Me the Money!

According to my handy-dandy mortgage calculator app (Loan Calculator Plus from the app store), if your thirty year loan has an interest rate of 4.25%, your monthly payment of $150,000 house would be less than $1000 per month.  (FYI – 4.25% is actually kind of high.  At 3.65%, that payment would be about $100 less.)

The down payment and closing costs on $150,000 would probably be somewhere upwards of $9000.  And before you panic, a large portion of your closing costs could come from the seller.   

Brand A or Brand B?

Consider this:

If $1000 per month will buy this:

Or $1200 per month will rent this…

At the time of this writing, the top house is listed in this area for $149,500.  The bottom house was just rented for $1200 per month.

This Isn’t Algebra, Is It?

I don’t know about you, but math is not my strong suit.  Fortunately, it doesn’t take Einstein to calculate that if you pay $1200 per month for rent, in three years you’ll have spent $43,200.

On the other side of the scale, if you purchased a home today for $150,000, and your payment is $1000, you’ll still spend $36,000.  That's a lot of money, either way.

 However, if you sell that house for $150,000, or maybe even a bit more, you’ll walk away with a little money to put down on another, bigger house.  In that case, who has benefited from your home ownership?  You have -- in credit worthiness, in quality of life, and more than likely, financially.

And who benefited from your rent for the last three years? 

Your landlord. 

You Need Professional Help….

           

            There are some easy steps to follow to decide if the time is right.

            1.  Get a pre- approval.  Visit a local lender. Talk to someone who understands the process and can help you understand it as well.  While you’re there, ask questions.  What will it cost me at closing?  What will my payment be?  Don’t leave there without getting all your questions answered.

            2.  Search Online.  Take advantage of offers to notify you if something comes on the market that might meet your needs.  It’s free, it’s no commitment and it can actually help you see what’s going on.  After all, the more you know…

            3. Find a realtor.  Pick someone a friend recommends.  Or pick a company that you respect. (Subliminal message:  Pick Paradigm!  Pick Paradigm!)

            The bottom line is Get Professional Help.  You can search online for months at a time, but you’ll never know if you really like a house until you walk through the door. And you’ll need a professional to help you through that strange and intimidating world of contracts, homes inspections, terminations dates, etc.

            4. Make a list. List what’s really important to you.  You might think you can’t live without that pink bathtub, but….

            5. And Get ‘Er Done!  Before some government blockhead raises the interest rate and your $150,000 house payment is $1100… or $1200… or $1300. 

See what I mean?

Timing is Everything!

Especially in hand grenades.  You don’t want those little suckers going off early, do you?