Introduction.

I could talk about factors to consider when you want to buy, how much you can afford, common buyer's mistakes, how to get the right home at the right price. I could offer you numerous reports, tips, tricks, market trends, real estate news. I could give you enough reading material for a few weeks...Information overload! Therefore, you will find general key information in this section. I know that buying a home is an important decision in your life with a strong financial and emotional impact. But I feel that your situation is unique and needs customized attention. When you are thinking or ready to buy, your best move is to give me a call. I will listen to your wants & needs, ask the right questions and analyse your situation. I will tell you all YOU need to know.

1. Residential

You are thinking to buy a property. What is your current situation? a Living with family or friends, b renting c already owner of a property and looking to upgrade or downsize?

a You are currently living with family/friends. You don't pay any rent. Your drive to buy a house is not financial! You want to make money? Stay where you are and find investment opportunities. You want to move to buy independence, space or because a family situation changed and you have to move. Consider your income and the costs you will be looking at. Are you sure you want to move? If you don't need to, consider if independence and space is worth the cost (see section b for an overview of the costs). If you think it is, or you need to move, you can do one of two things: buying or renting. Section b will tell you all about the buy vs. rent tradeoff.

b You are renting and you want to buy or you decided to move and are thinking between renting or buying. There is really only one thing to look at: what is the financial tradeoff? Time and saving money will be important factors in the tradeoff. Before going in detail, here is the general answer: if you have enough money available to buy a house AND you qualify for a loan AND you are planning to stay in it for a couple of years AND you can handle the monthly payments: buy.

When renting, what is your cost? Any rental agreement can be different, but typically you will be looking at paying rent, utilities, water and cable. Landlord always pays for the garbage.

When buying, what is your cost? You will be looking at money to be paid when you buy and monthly expenses. Money to be paid when you buy includes earnest money, one year insurance, taxes when downpayment is less than 20%, the downpayment and closing costs (approx. $1,200). Monthly expenses include mortgage, insurance, private mortgage insurance (PMI - untill equity in the property is 20%) and property taxes. Utilities, water, garbage, cable, internet. Then again, home ownership offers tax advantages. You can deduct interest part of your mortgage and property taxes on your tax bill. And you will have a homestead tax break. Another advantage is that your property value will most likely go up. But this is not always true. Neighborhoods can deteriorate and when house prices rise too fast, you can have a bubble that is ready to burst.

So where is the trade-off? This really depends on your situation! What house are you looking at? How much are you planning on paying down? What is your monthly rent? How long are you planning on staying in the house? I have made a model that will give you the tradeoff and buy vs rent return when I have those numbers. Give me a call, we'll sit together and go over the financials, and you will be ready to make the right decision. One important remark. Forget the general idea that you need to stay at least 3 years in a home to break even. In Decatur's current Real Estate market, you can break even in 1 year!

What can you afford? Look at your gross income and apply the 28/36 rule: mortgage, insurance, PMI and taxes on the house should be 28% or less of your gross income. Include the payoff of other loans (car, school, ...)  and the total should be 36% or less of your gross income. Make a cash flow analysis. What is the cash coming in? What is the cash going out? You'll be paying utility costs, water, garbage. You want sattelite tv? high speed internet? Small amounts easily add up. Be prepared for the worst: if you lose your job, how much time will you have to find a new job? Manage your risks. Make a worst case scenario. Be realistic in any assumption you make.

An important remark when you want to buy: you cannot make an offer on a house without proof of financing. Since you will most likely finance with a loan, you will need to contact a bank or mortgage broker to get pre-approved. Bad credit? Personal bankruptcy? Wondering which companies offer the best deals? Give me a call, tell me about your situation and I'll get you on track.

c Own a home and upgrade or downgrade: two things are important: make a financial tradeoff and decide on a strategy. Since you already own a house, you pretty much know what the costs and benefits are of home ownership. So if you go for a more expensive house, you'll have more expenses and vica versa. The most important thing is strategy which is mainly determined by the market conditions. In a buyer's market, put your house for sale. When you find a buyer, look for a house. In a sellers market, buy a house and put your house on the market. Try to avoid contingencies but also avoid double mortgage payments. And don't lose negotiation position on any end. Plan and use the right strategy. Give me a call, we'll sit together and I'll help you with making the right decisions.  

2. Commercial

You want to start your own business and want to buy a commercial property? My advice: don't jump into a commercial adventure without thorough and realistic planning. Prepare your Cash Flow, Balance Sheet, P&L. Lenders will require that you make a business plan. So before you could even bid on a commercial property, you'll need proof of financing. The same is true for residential properties, it just takes more than having good credit to get commercial loans. Where do I come in? My financial background and small business management courses I took are allowing me to give you good estimates. I can locate the right property for your business and determine the right price.

3. Investment properties

There are mainly two ways to invest in Real Estate. Remodel homes ('buy low, improve, sell high) or rent (Single Family/Apartment buildings). Decatur offers great opportunities to do both. Especially the Rental Market offers fabulous returns mainly since homes can be bought cheap with competitive market rents. Here's some general information:  

Fixer uppers: be sure to have enough working capital. You will put money in a project that you are only going to see back when the property sells. With that in mind, buying fixer uppers is a matter of knowing what a home will sell for, subtract all anticipated expenses and profit you would like to make. This will give you the maximum dollar amount to pay for a fixer upper. Be sure to add contingency to anticipated expenses. We are all too optimistic when we plan. 

Rental properties: the returns that can be made in Decatur's rental market are fabulous. You can buy homes that are already rented or get a fixer upper rent ready. Typically, your total investment will be higher buying an already rented or ready to rent home versus one that needs rehab. Factors to consider is how long a rehab will take and how you are planning to finance the home.

The returns in the rental market are made or broken by the tenants. Thorough screening and not depending on just one rental home are key. When you are an absent landlord, there is local project and property management available.