Equity Dynamics

Equity is the difference in what your home is worth and what you owe. Ideally, as the value goes up and the unpaid balance goes down with each amortized payment made, the equity grows from two directions.

This dynamic leads to increasing a person’s net worth much faster than many other investments.

A homeowner has minimal control over value. It is necessary to maintain the property to avoid depreciation and make good decisions on capital improvements. After that, appreciation is generally controlled by supply and demand and the economy.

Mortgage management is something that the homeowner does have control. Making the decision to select a shorter term mortgage at a lower interest rate can have an impact on equity build-up. Lower interest rates amortize faster than higher interest rates which will also affect equity growth. Currently, it is possible to get a 1% lower rate on a 15 year mortgage than a 30 year mortgage.

Compare two alternatives of a 30-year and a 15-year mortgage. The payments will definitely be higher on the shorter term because it pays off quicker. However, if a person can afford the higher payments of $362.53 more per month in this example, the equity will be greater. Even after you take into consideration the higher payments, the increased equity is $17,236 at the end of the seven year holding period.

Another decision that can affect equity build-up is making additional principal contributions along with the regular payments. Whether you’re making an occasional lump sum payment toward principal or regular monthly contributions, it will save interest, build equity and shorten the term on a fixed rate mortgage. Estimate your personal savings with this Equity Accelerator.

Who is my agent?

More often than you’d expect, homeowners refer to the person they bought their insurance from as their agent. It sounds reasonable but it’s definitely not accurate. That person is the agent of the insurance company and they legally represent the company, not the customer. Even an independent agent who can place a policy with different companies is still an agent of the company.

A mortgage officer, in most cases is an employee and represents the company. And the same is true for a title or escrow officer. It’s important to understand the actual relationship to know what you can expect from them.

Any business person who wants to stay in business must treat their customers fairly and with a high degree of service. As a customer, you should be able to reasonably expect honesty and accountability. The difference is that employees owe their loyalty to their employer and agents owe their loyalty to their principal.

An agent owes more than just honesty and accountability. The principal can expect complete disclosure, obedience, loyalty, reasonable skill and care and confidentiality from their agent.

This advocacy is very beneficial during the buying or selling process to coordinate all aspects of the transaction. The agent can bring valuable experience to your side of the transaction to provide confidence that your best interests are being represented from start to finish.

Most states have a recognized procedure for the real estate professional to create a formal relationship between themselves and a buyer or seller. This requires a fiduciary/statutory responsibility that places the principals’ interests above the agent’s own personal interests.

The Rules

The profit potential in single family homes for investment has been a consistently good long-term investment. They offer investors the opportunity of high loan-to-value mortgages at fixed interest rates for 30 years on appreciating assets, tax advantages and reasonable control that other investments don’t offer.

Last year, Warren Buffett said that if he had a way of buying a couple hundred thousand single-family homes, he would load up on them. Blackstone group L.P. (BX) has now purchased over 30,000 homes and American Homes 4 Rent (AMH) has more than 19,000 for rental purposes.

Individual investors actually have an advantage over the institutional investor but if they are not familiar with rental real estate, some basic rules could be very helpful.

1. Invest now to get more in the future. 
   Whether it is time, effort or money, the prudent investor is willing to forego immediate gratification for something more at a later date.
2. Real estate is an IDEAL investment. 
   IDEAL is an acronym that stands for income, depreciation, equity build-up, appreciation and leverage. 
3. Invest in single family homes in predominantly owner-occupied neighborhoods at or below average price range. 
   This strategy should involve homes that will increase in value, rent well and appeal to an owner-occupant in the future who will pay a higher price than an investor.
4. Location, location, location. 
   The same homes in different areas will not behave the same. You can improve the condition, modify the terms or adjust the price but the location can’t be changed.
5. Understand your strategy – buy and sell, buy and hold or buy, rent and hold. 
   These three distinct strategies involve big differences in acquisition, management and taxation.
6. Know where your profit is coming from before you invest. 
   The four contributors to profit are cash flow, appreciation, amortization and tax savings. They don’t contribute equally or the same in all investments.
7. Profit starts with purchase. 
   Buying the property below market value builds profit into the investment initially.
8. Risk is directly proportionate to the reward involved. 
   An investment that has a high degree of upside also will have considerable downside possible.
9. Avoid functional obsolescence unless you have a plan before you buy. 
   The lack of usefulness or desirability of a home that exists when you buy it will still be there when you sell it. Unless it can be cured, it will affect future profit.
10. Good property + good tenant + good management = great investment.
    These are three solid components for a successful investment.
11. Problems left unresolved have a tendency to get worse. 
    It is generally cheaper in time or money to fix a problem earlier rather than later.

If you’d like more information about the opportunities in our market, contact me.

39.65 Square Wooded Acres, Sugar River Road, Gladwin MI - SOLD!

Beautifully Wooded 39.65 Acres Near Sugar Springs.

Has a small, rustic hunting cabin and lots of trails and blinds.

SOLD!

Beautifully wooded parcel near Sugar Springs. Are you looking for a nice, square parcel on a paved road with lots of mature trees, trails and blinds? You may have just found it. This beautiful parcel is located close to Sugar Springs and several lakes. Enjoy great hunting for deer, turkey, squirrels and even bear! Great hunting parcel or building spot. There is a large shed with a sleeping loft that they currently use as a rustic cabin and a path bath. Need appointment to walk it, because the sellers are often up using it.

3666 Eagleson Road, Gladwin MI - SOLD!

Great Place to Build or Store Your Things!

SOLD!

Nice rolling 17+ acres not far from town, with a large 40x80 pole barn with electricity and well installed. Great location to build a home or use the pole barn for storage. Land is mostly open but it home to deer, turkey and other wildlife. Pole barn was built in 1988 and has a concrete floor, large sliding doors, overhead crane and a office or storage room.

Find the "Right" Agent Before the "Right" Home

It’s a common practice for buyers to make a list of what they want in a home during the search process and to explain it to their agent. However, maybe the first list they should make would have the skills they want their agent to have.

The Profile of Home Buyers and Sellers identifies what buyers want most from their agents and as you’d expect, help with finding the right home was ranked highest most often. While it is important, it may not be the most unique of the desired area of expertise.

Equally essential to the success of the transaction are the combination of help with price and terms negotiations and assistance with the paperwork, comparable sales, qualifying and financing.

To summarize the responses in the survey, Buyers want help from their agents with two things: to find the right home and to get it at the right price and terms. Some agents are actually better equipped with tools and acquired knowledge to assist buyers with financial advice and negotiations.

Since an owner’s cost of housing is dependent on the price paid for the home and financing, a real estate professional skilled in these specialized areas can be invaluable in finding the “right” home. An agent’s experience and connections to allied professionals and service providers is irreplaceable.

Ask the agent representing you to specifically list the tools and talent they have to address these areas.

1664 Cumberland Circle, Gladwin MI - SOLD!

This Great Lot already has Well, Sewer and Electric Installed

SOLD!

Nice camping lot with well, sewer, electric and driveway already installed. Completely set up for your camper! This level lot is just a short walk away from the Berkshire Beach Club and boat launch for Lake Lancer. Enjoy the amenities that Sugar Springs has to offer, such as: Two all sports lakes, several beach clubs, 18 hole golf course, restaurant, heated indoor swimming pool, camp ground, sledding hill, walking trails and more! (Additional adjoining lot #22 available for $3780 more). 

5329 Winchester Way, Gladwin MI - SOLD!

Newly Remodeled Home with Nice Fresh Interior and New Roof

3 Bedrooms, 2 Full Baths

SOLD!!!

Beautifully remodeled home within a short distance from both Lake Lancelot and Lake Lancer. This home features new floors, new windows, new drywall, new cupboards & counter tops, new bathrooms, new roof and much more! It's like walking into a brand new house! This home is "move-in" ready with immediate occupancy! Enjoy the amenities of Sugar Springs with the boat dock area just a short walk away or ride your bike down to the beach with a nice playground for kids! Sugar Springs also has an indoor heated swimming pool, 18 hole golf course, restaurant, pro shop, campground and more!

5641 Lakeside Drive, Gladwin MI - SOLD!

Nice Cottage Located in a Quiet Setting on 2 Lots overlooking the lake.

2 Bedrooms, 1 Bath, 1 Large Shed and 1 Small Shed

SOLD!

Cute, recently updated, two bedroom cottage overlooking McGilvery Lake. The interior and exterior was just recently updated and give that "up north" cottage feel. Watch Bald Eagles fly by in the morning and enjoy beautiful sunsets in the evening. This cottage comes with 2 waterfront lots with over 422 ft of waterfrontage. Located at the very end of a dead end road on a point. Cottage includes appliances and a newer large shed that also doubles as as an outside sitting area with a view of the lake. There is a flowing well and a small frog pond. Enjoy an amazing view of the lake and some fantastic fishing!

80 or 40 Acres Stockwell Road, Harrison MI SOLD!

Great Hunting or Building Parcels with Trails and Blinds!

$119,999 for 80 ACRES

$63,000 to $64,000 for 40 ACRES

SOLD!

Great hunting or building parcel, located on a county maintained road just minutes from town, but still very much out in the country. This property features plenty of trails, several hunting blinds, a camping area and even a seasonal creek on the east side. Lots of pine and other mixes of trees. Plus, plenty of deer sign and several hunting blinds. Also lots of Turkey in the area. This property can also be sold as two 40 acre parcels. 

3729 West Branch Dr, Gladwin MI - SOLD!

You will love this Charming waterfront Home with Finished Walkout Basement.

3 bedrooms, 2 Baths, 2 Car Garage, 3 Car Pole Barn and Shed

SOLD!

WOW! You will fall in love with this immaculate waterfront home on 2.5 lots, overlooking the west branch of beautiful Secord Lake. This gorgeous ranch style home features a full walkout finished basement with plenty of living space and sleeping space, two decks overlooking the lake, main living space overlooking the lake, whirlpool tub, screened in attached garage set up to entertain guests, plenty of windows and door walls on the upper and lower levels to let in the view and the light, SunSetter Awning on the upper deck and so much more! There is even a separate pole barn and shed for lots of extra storage. This home on the water is a MUST SEE on your tour of homes on Secord Lake!

Retirement Without a Mortgage

Planning for retirement is obviously important and many times, an activity plagued by procrastination. Some people plan to have their home paid for by that magical date so they won’t have payments after they retire. It makes sense to eliminate a large recurring expense before they quit working.

One strategy would be to be make regular principal contributions in addition to the payments so that it will eliminate the debt by the target retirement date.

Let’s say that a homeowner refinanced their $200,000 mortgage at 4% last year with the first payment due on May 1, 2012. Under normal amortization, the home would be paid for at the end of the term; 30 years in this example.

By making additional principal contributions with each payment, it would accelerate the payoff on the home. An extra $250.00 a month would pay off the mortgage in 10 years. $524.55 extra with each payment would pay off the loan in 15 years; and $796.23 would pay off the loan in 12 years.

Having a home paid for at retirement has the obvious benefit of no house payment. It is also a substantial asset that could be borrowed against or sold if unanticipated events should occur.

Another strategy might involve purchasing a smaller home now to use as a rental that you intend to live when you retire; see Retirement Home Now.

To make some projections to pay off your own mortgage, use this Equity Accelerator.

 

The Return of the 10 Percent Down Payment - Yahoo! Homes

The Return of the 10 Percent Down Payment - Yahoo! Homes

Remember the 10 percent down payment on a house? After virtually disappearing for years, it's back.

Around the country, some lenders are offering 90 percent financing again on all loan types. For example, San Francisco-based RPM Mortgage resumed offering "piggyback" loans in the first quarter of 2013 after discontinuing them during the height of the credit crisis in late 2007, according to Vice President Julian Hebron. (A piggyback loan enables a home buyer to put only 10 percent down without having to buy mortgage insurance. This is done by getting two loans totaling 90 percent.)

* Click on the Link Above to Real Article...

First Person: We're Paying Off Our Home in Half the Time - Yahoo! Homes

First Person: We're Paying Off Our Home in Half the Time - Yahoo! Homes

My husband and I took out a 30-year mortgage in 2005. Our goal was to pay off our mortgage in half the time. Looking back, it would have been easier to force ourselves into paying our home off early with a 15-year mortgage. However, we are still committed to our goal of paying off our home in half the time.

Read more by clicking on the above link...

When Rates Go Up

Rising interest rates are great if you are renewing a certificate of deposit but not so much when you’re borrowing money. With interest rates on the rise as well as home prices, housing affordability is a concern for would-be homeowners.

A rough rule of thumb is that a person’s or family’s housing should not exceed 28% of their monthly gross income. While rental rates and home prices have been consistently increasing, mortgage rates have been soaring in the past month. In one week, according to the Freddie Mac Primary Mortgage Market Survey, they jumped by .5%.

This means that people have to pay a larger percentage of their income for housing unless their incomes have been increasing at an equal pace.  A $200,000 mortgage would be over $100 more per month if closed in July compared to closing at the interest rates available in January of 2013.

If rates increase by .5% by the time you close on the same size mortgage, payments would increase by almost $60 per month. In order to keep the payments the same, a borrower would have to put an additional $11,000 down to lower the mortgage amount. 

Check out how your payment would be affected if interest rates continue to rise.

The National Association of REALTORS® suggests that housing is more affordable now than one year ago. However, with all of the variables in play including inflation that was not addressed in this piece, it is unclear how long conditions will remain “affordable”. 

FHA & VA Assumptions

Not many buyers have assumed a mortgage in the past 25 years. Most people think it was because FHA and VA in the late 80’s began to require that buyers qualify for the assumptions. Not having to qualify for a mortgage would certainly benefit certain buyers. 

If a homeowner must qualify for an assumption like a new loan, they'll generally choose the mortgage with the lower interest rate.  Over the past 25 years, rates have been trending down but it appears that rates have bottomed out and will gradually increase.   As they continue to rise, the lower rates on the FHA and VA loans created in the last few years will appeal to buyers even if they do have to qualify for the assumption.

There are significant advantages to assuming one of these government insured mortgages if the current interest rate on a new loan is higher:

1. Mortgage is further into amortization schedule
2. Lower interest rate loans amortize faster than higher interest rate loans
3. Lower closing costs than a new mortgage
4. Easier to qualify than on a new mortgage
5. No appraisal required

FHA assumptions are only allowed as owner-occupied residents. The borrower must meet current FHA guidelines for borrowers. The total debt ratio including house payment to be assumed cannot exceed 41% of borrowers’ monthly gross income.
VA loans are also assumable with buyer qualification. However, in order for the veteran Seller to have their eligibility reinstated, the buyer must also be a veteran with eligibility.

A 1% difference in the current rates and a lower assumable mortgage rate begins to make it very attractive to assume a mortgage. When the differential becomes even greater, assumptions will become more prevalent than they’ve been in over twenty years.

Debt Relief = Income

Many times a homeowner might feel relieved being out from under the obligation of a mortgage they can’t afford even though the property was lost due to foreclosure or short sale. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious.

Congress enacted the Mortgage Relief Act specifically to help homeowners who might be affected in the housing crisis that started approximately in 2007. The Act expired on 12/31/12 but was temporarily extended by Congress until December 31, 2013.

This relief only applies to a taxpayers’ principal residence which does not include second homes and investment property. The maximum amount is limited to $2 million of mortgage debt forgiveness or $1 million if filing separately.

Another provision is that the debt relief is limited to acquisition indebtedness used to buy, build or improve the property. It excludes cash equity loans whether made separately or in a refinance of the original mortgage.

Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals.

100 Acres Woods Road, Clare County - SOLD!

Great Hunting Camp that can also be sold as 60 acres, 40 acres and 18 Acres in NE Clare County!

SOLD!

Are you looking for a secluded hunting camp with lots of rolling acreage, mature trees, food pots, established hunting blinds and lots of wild game? Then you may have just found it! This beautiful property is a hunters delight with several food plots, trails and blinds. Lots of deer in the area. 

The sellers had a professional deer management person come in and prepare the deer habitat. Several small clear cuts were made to promote desirable deer habitat, but it also great for turkey, grouse, woodcock and other local wildlife. There is also a small pond near one of the food plot areas to provide water to deer. There is a nice log sided cabin with a bunk room, wood stove and a kitchenette area. Great place to make hunt camp memories with family and friends. You can make this your own!