Here are Mike's financial ABC's for home
buying. There are also lots of personal reasons for choosing the right home such
as the right neighborhood and using the right Real Estate agent.
Always buy pre-owned !!!
Mike specializes in selling new and pre-owned homes even though
most builders and developers (including the largest ones in this area) will pay
3% to bring a buyer to their properties. Let's say a builder gets $100,000 for a
"Galaxy" model. Next year he builds the same Galaxy model, but to stay
competitive, he uses a smaller sized lot. The following year he adds less
"extras" and still only charges $100,000.
The year after that he utilizes cheaper materials to keep
prices down.
The Galaxy model looks very attractive to the unsuspecting
first-time buyer; a nice house for a reasonable cost. But what happens to RESALE
VALUE when its time for you to sell? You now understand that the builder is your
competitor and you can't compete. Why would someone want to buy your house when
a new one is available at a smaller price? Not to mention your competition from
other sellers who have to ask a discounted price. It's a vicious circle that you
can't win at....The exception is when a builder is "closing-out", where there
will be no future competition from this builder (or others in the immediate
vicinity).
Of course, there are other advantages in buying pre-owned homes:
A seller will often include personal property like window
treatments, fans and fixtures, pool equipment, hurricane shutters, etc.
Also, you are usually buying an "established" neighborhood
that has community support, a proven school system, and larger, lasher
landscaping.
Buy a home with
the lowest down payment that you can!
There are many reasons for this, but the most important ones concern the
"Boom or Bust" scenarios. In a Boom period of rapidly escalating prices, you are
guaranteed greater profits by the principal of LEVERAGE. By using other people's
money, your return on equity is much greater than had you paid cash.
In a Bust period of declining prices, the answer is obvious; it's much easier
to "walk-away" from a small down payment than it is from a larger deposit.
Another important reason to consider is income taxes:
The smaller the down payment, the larger the mortgage interest payments
that are entirely tax-deductible It's really the only "good" deduction the
average person has.
Think about it...Uncle Sam is subsidizing the best investment you'll
probably ever make!!.
Another reason for using a small down payment is also pretty obvious -
you'll have more money left for other investments.
Maybe another house with even greater tax savings (depreciation and
more!), or maybe mutual funds or IRA's or whatever you may consider for
diversification.
A total sum of $5000 can buy you a $100,000 home, especially if you're a
first-time buyer. Many people rent a home not knowing they can own with just a
little bit more than first, last, and security.
Choose a smaller to medium sized home in
the best neighborhood that you can possibly afford.
In other words, NEVER buy the "biggest house on the block". Recall the
age-old axiom of Real Estate that says your main consideration should be three
things: location, location, location.
I agree with this, but I take it one step further; the better the area, the
better the appreciation except for the largest homes in an "average"
neighborhood. Your chance for profit is much better in a smaller to medium home
in a good area!
