Buying Property in Auburn

What? Buying real estate in this market?>#@! Of course!! Just made an offer today. Why? Prices have come down from their previous high for sure, so we are in a more realistic market with more supportable values. Many buyers are sitting on the fence waiting for prices to come down. As they are doing this, the reasonably priced homes are getting snapped up within days by other more savvy buyers. Too much attention to the media and too many ‘friend of a friend of a friend supposedly in the real estate business’ giving their expert opinions, has completely confused a major portion of the consumers who would otherwise buy property. People also forget that many of the high prices that were ‘posted’ at the height of the frenzy last year were merely some sellers fishing for a buyer who might pay an exorbitant price for their home, and not based on any market comparables. A good buy is a good buy in any market, or in other words if the value is there, it’s a good investment. Another factor in this market is the fact that many sellers actually over extended themselves either in buying too much home or racking up too much consumer debt, or both, so some sellers are actually desperate and will sell under the market price. Bargain properties are available, even though the general public may not believe it.

As a long time resident of Auburn also, I believe it is a great place to invest for a variety of reasons. One reason is the location-2 hours from San Francisco, 1 hour from Lake Tahoe and on route 80 which is a major freeway. There also are many outdoor recreational activities in Auburn, such as beautiful & extensive hiking trails, river rafting, etc. There are major employers nearby such as HP, Intel, Oracle, Coherent, Hospitals such as Kaiser and Sutter, and major shopping areas also. Auburn still retains it’s small town atmosphere, so it’s the best of both worlds. The rental market is good also since prices tend to be more here, than in the surrounding areas because of the desirability of Auburn. Land is less available also which keeps values up. People who can’t afford to buy here will rent instead. The movie ‘Phenomenom’ with John Travolta was filmed in old town Auburn, at the Shanghai Bar (the name of the bar was changed in the movie). Another movie was filmed at the Foresthill Bridge, over 700 feet high over the American River.

Loan Consultant versus Loan Salesman-what’s the difference?

When you hear the mortgage company ads on radio or TV, most people would say mortgage companies consist of loan salesmen/women. It’s pretty obvious from the language used that they would be correct in this opinion, and they are most of the time. This creates confusion for the consumer and in effect trains the consumer to shop for the lowest rate, which is what everyone wants, correct?! Yes and No!! I guarantee that if you shop around you will always find a lower rate, by simply asking! What invariably happens is that you get what you ask for on the surface, but you will be penalized somewhere else, usually before you realize it, and end up with a loan that could be completely wrong for you. This situation usually results from obtaining a loan from a loan salesman not a consultant. A consultant asks alot of questions, (other than the obvious-what do you make?, what is your credit score?) such as what your short and long term goals are, how long are you going to be in the house, are you trying to make money on this? (a flip,etc), how close to retirement (are you satisfied with your retirement plan & amount), do you want a pre-pay penalty (which will usually lower your interest rate), do you want to pay points (with an explanation why you might or might not want to), etc, etc. Anyone can quote rates without these questions (which is what a salesman wants because it’s an easy sale!),but this is like going in for surgery before the doctor has met with you, done tests and consulted with you! Who would do that!!?? In the loan business, many people get a loan in just this manner!!! This is great for the loan salesman and terrible for the consumer, and creates a bad environment for the true loan consultants. There is so much B.S. flying around that it’s hard to see. It’s like a snowjob!

My background as a General Contractor, Real Estate Investor, and Mortgage Professional, brings a more comprehensive knowledge to my clients. My own experiences and successes in all these professions is what motivates me to help others, since I know what I’ve been able to accomplish myself utilizing what I’ve learned. My mission is to show others how to use mortgage financing in particular to create extraordinary wealth. This entales a thorough understanding of each client’s unique circumstances and their goals, in order to lay out options to attain these goals. I need to know exactly where they are now and where they want to go, to be able to offer any value. As advertising essentially trains the consumer that a mortgage professional is not the person to seek financial advice from, most people are surprised that I ask the questions I do ask. They end up being pleasantly surprised that I care enough to really help them!! What a concept!!!

How many dogs are pulling your sled?

Most people own one home. At retirement age 50% of a typical person’s net worth is in their home. The other half they worked for over 30-35 years! The net worth that is in their home has got there mostly from time going by, some of it by payments to principle, and some of it by remodeling and other ways of increasing value. Most people understand how much real estate has increased over the last few decades, especially if they decided to sell it!! The average appreciation over the last 25 years has been 6.5% annually in California, around 2% more than the national average.  If we accept the premise that real estate has been an appreciating asset for a long time and that it will continue to do so, then having more than 1 property would seem a great idea. The largest contribution to appreciation is the passage of time. Normally, time going by doesn’t seem like a good thing, since we’re all getting older! However with real estate it is the greatest thing! As long as you can hold onto it and not have it adversely affect your income and life, then it is a win-win game. Rentals are great in that you are able to control property, yet not pay for it, as your tenants are doing this for you. There are many loan programs out there that allow a positive cashflow with 20% down. These go by many names such as Option ARMS, Cashflow ARMS, etc. These have gotten a bad rap from some, especially the media. In the wrong hands they are a recipe for disaster, in the right hands & with professional guidance they are a powerful tool to gain extraordinary wealth. So… How many dogs are pulling your sled? Let’s add some dogs so we get to our goals and dreams faster!!! Even if you don’t have any dogs now, with good credit you may obtain your first with 100% financing and a low pay rate. A $400,000 loan can be had for as low as $1320/month for the first year. With 100% financing it is important that you have a plan for creating equity by creating value in a financially conservative way-doing the work yourself for example, doing cheap improvements like painting, putting in plants, etc. The goal is to create 20% equity as rapidly and cheaply (this doesn’t mean tacky by the way) as possible, in order to refinance into a lower and more stable interest rate. This particular program offers the lowest pay rate I’ve found and thus is the least monthly cash outlay to the lender, allowing the borrower to create their own equity faster. Lenders reward borrowers for having more equity, as it means less risk for them. I guess that’s it for today!

6 Timely Tips To Sell Your Home FAST

Have You Noticed How Many Homes Are For Sale in Our Area Lately? Which ones are selling and which ones are not? Being a sucessful seller in todays market means being one step a head of your competitors in the race to entice a buyer to purchase your home. Roll up your sleeves, have a positive attitude and follow these important steps to sell your home and sell it fast!

1. Price it right. This is the number one most important step!That’s right. Skip it and the rest doesn’t matter! Don’t even read the other steps unless you follow this step! Pricing it right means pricing it to sell to todays buyers. These buyers are savvy. They want a good product at a fair price. I know, your neighbor got so and so for their house last year. This isn’t last year! This is now. So show them you’ve got what they want and be smart on the price. Have a qualified real estate agent show you market comparable properties to find out the best price that will sell your home fast. Don’t choose the agent who will market it at the highest price! Todays buyers know the market, they will not buy an over priced home and many will not bid any amount for it!They will pass on it and go to the next one. You have lost them before they even walked into your home!! Don’t go there!

2. Clean is King!These savvy buyers want a home they can move right into. That means clean. Clean walls, woodwork, windows, blinds, drapes, carpet and floors.  Bathrooms and kitchen have to sparkle. If you have to paint to get that fresh ,crisp look, do it! Paint is the cheapest fix-up there is with the most financial gain. Choose modern, light colors, don’t just paint it the same color it was. Move up with the times! Also, adding fragrances attracts people subconsciously. Purchase plug-in air fresheners that have fragrances like cinnamon, apple pie or vanilla. These inexpensive fragrances makes a home feel ‘homey,’  and buyers feel good. Remember, buyers are looking for a place to call home. Let’s give them plenty of reasons to feel special in yours. When they walk in you want them to say ’Wow’!

3. Remove Clutter. Be a Minimalist.  Why are model homes so inviting? Because no one lives in them! They don’t have the reqular items lived-in homes have, like toothbrush holders and coffee makers on the counter. I know it’s sometimes hard to do, but stashing stuff away is a must.  A good rule of thumb, to make your home look more spacious and clutter free, is to remove two-thirds of the items from the rooms and walls. You say ‘Thats alot’! It is. But it works!Personal items such as family photos are best put away so buyers don’t feel like they are in someones else’s domain. Equally important, remove unnecessary items from all the closets too and organize what’s left.  You want these to look spacious and roomy too. Store items you don’t use regularly in the garage or a storage unit and figure you’ve already started packing! The keepers like the coffee maker, put away in the cabinets when not in use.

4. Create drama at the entry to your home. Does your front door say ‘Welcome, you are special’ or does it say ‘I’m old and tired’? Sometimes just giving the door a fresh coat of paint in a modern color is all that is needed to revive it or if it’s really tired, consider replacing it with a new door. A nice door is a turn on and an ugly door is a turn off, it’s just that simple! If your door sticks and is hard to open, fix it! Remove the screen door if you have one and leave it in the garage for the buyers. Add a wreath or fresh potted flowers by the front door. Make sure the outside entry light is clean. You may want to replace it with a new modern one to enhance the appearance of your home. Remove spiders and webs, keep the front walk swept and bushes or low lying tree branches trimmed away from the front walk. First Impressions are Very Important!

5. Give Your Yard Curb Appeal! Flowers, Flowers and Flowers! Did I say Flowers? Being a Landscape Designer for 15 years, I know what works. In the ground or in pots, annual flowers are inexpensive and add pizazz! I like to choose a three color palette, and use these colors through out the back or the front. Figure out the feeling or look that you are trying to create. For ex: hot colors like yellow, orange and red says energy, excitement, happy.  Pink, blue and purple are more soothing colors. These cool colors make surroundings feel peaceful and tranquil, a place to escape to.  What kind of look do you want your yard to be? How about both? Use warm colors in the front and cool in the back. And while you’re at it, add a hammock and inexpensive plug in water feature for sounds to sooth the beast!

6. Last but not Least Make Your Home Easy to Show. Many folks forget this one, but it is as important as the rest if you want it to sell quickly. When an agent calls to show your home be flexible with showing times and days. Ask the agent to be sure and leave a business card. If possible, leave the house and take the dog for a walk before the buyers arrive. If you can’t do this, make sure the dog is locked up or at least outside and you leave. This makes the buyers feel more comfortable commenting and asking questions if the seller is not home. Plus they will stay longer. This is a good thing…remember we are trying to entice a buyer to buy your house.  Remember to turn on all the lights before you leave and give 30 minutes for the buyers to view your home.

Directions: Take Tips, stir with good attitude and grace. Swirl in a touch of elbow grease and creativity and Voila’, a delicious SOLD HOME!

Mortgages in your Toolbox

Banks make money using your money-lots of it! Are you???

Banks love savers. Banks loan out about 10 times the amount of their deposits (or more correctly, your savings), to make a better return than they are paying you.

Your home and or rental properties can be viewed as a personal bank. Just by being able to hold onto them for a time period results in their growing in value. In California, during the last 25 years, the average appreciation has been 6.5%, around 2% more than the national average. Now… a 6.5% return on your money doesn’t seem very exciting does it? Of course not! That is a miserable return on your investment (ROI)!Now comes the exciting part, which is using leverage. A mortgage is a tool that has been typically seen as a necessary evil involved in being able to own your own home. The by-product of this is a powerful way to leverage a small amount of money, to create extraordinary wealth!! People who have used this knowledge to their advantage have reaped incredible rewards, transforming their own lives as well as many others.

A typical home purchase would involve usually a 20% down payment, and financing the other 80%. Thus, a $500,000 home would only require $100,000 of your money. The appreciation would be gained on the $500,000 amount not just your money, thus multiplying the power of your money by 5 times. 6.5% times 5 equals 32.5% return on investment (ROI). Try that with a mutual fund!! This is a still a pitiful return in my view. It is based on averages and does not take into account some of the best features of real estate, such as:

1. We’ve all heard of LOCATION LOCATION LOCATION!!! It doesn’t take a rocket scientist to pick a good location, just common sense! You can beat the averages easily here!!

2. Control. (not like the stock market or retirement plan!) A home is a readily marketed item at the right price-everyone needs a home!

3. Financing through mortgages. You can invest anywhere from $0 (100% financing with seller paying closing costs-very easily done) to paying 100% cash. Using averages, 80% financing would give you 32.5% ROI, 90% financing would give you 65% ROI, 100% financing would give an infinite return!

4. Management of equity. Extremely important and often overlooked. You can manage the amount of equity that you are putting into your real estate by the use of different types of loan products. This is a little more sophisticated and requires planning, financial responsibility, and a true commitment to your goals. One of these tools is the “Option ARM” also known by many other names. It allows for paying a lower monthly payment than the interest-only payment to decrease the amount of monthly cash outlay. This is another form of leverage. It is an adjustable rate mortgage and therefore must be used with care. As with many great tools (of any kind), the misuse and misunderstanding of them can result in disaster!! Everyone has heard of people who have lost their shirts in real estate! There has been a fair amount of bad publicity about adjustable rates and particularily Option ARM mortgages. I would just say that the products are not the problem, instead the person who is using the product in the wrong way, or does not understand how they work (more of this another day).

5. The simple fact that there is no more land being made, and that the population continues to grow exponentially, results in the inevitable increase in value of residential properties.

6. 3rd grade math is about all you need to know for real estate!!!

7. You can start from nothing and create massive wealth over time.

8. Did I mention leverage?

9. Timing. Another very important factor. Usually we think of ‘buy low sell high’. That is fine, but to me, the real power of real estate is being able to hold onto it for as long as possible (generations). You must buy real estate and have it make financial sense the moment you buy it. Many people will buy anything in times of great appreciation, and disregard their own rules for investing by getting caught up in the frenzy-this has happened a lot recently!!! They will buy it now for too much, banking on appreciation to turn a normally bad investment into a good one. This does work for awhile, but sooner or later they will be caught in a market correction (as we have been experiencing for about the last year), and risk losing everything. As a mortgage professional and a real estate investor, I have seen a lot of people getting caught in this latest correction. Timing is about buying the right investment at this point in time. In this type of market there are many deals to be had, simply because many people didn’t see this correction coming. As the great real estate investor/author Dolf de Roos said, “the deal of the century comes around about once a week” (this is as I remember it!)

10. Tax advantaged! This is also a big one! On residential property, the IRS lets you ‘depreciate’ the structure only over 27.5 years, meaning that in 27.5 years, it is considered for tax purposes to be worthless. We all know by now that property in fact appreciates! On rental property, this means you can recieve a substantial monthly income or cash flow and not pay tax on it. Also, if you recieve enough cash flow to be taxed on it, the rate is less as it is regarded as passive income, not earned income. Remember to consult your CPA as they are the experts!!

11. Refinance it!!!! As you make money, you can pull it out tax free as this is a loan (from your personal bank), and go buy another house/bank.

12. With the right mortgage your renter should cover all expenses on your property, plus give you a small positive cash flow every month! Each house/bank should support itself by itself, none of this negative cashflow that makes you slave to support your properties!!!

13. If you must sell rental property, use a 1031 tax-deferred exchange to roll into another or several properties. This means not putting your hands on your profits, but rolling them tax free into another house/bank. You may take some cash and pay tax on it if you wish-this is called ‘boot’.

….. I could go on and on and on and on,etc.,etc.-but I think I have made my point! This is what I practise and preach, so I can get a little carried away!