How to Get a Better Perspective on Affordability

Headlines spotlight the fact that buying a home is less affordable today than it was at any other time in more than a decade. Understandably, buying a home is more expensive now than immediately following one of the worst housing crashes in American history. As a result, mortgage rates were kept low to help the economy. This has impacted housing affordability. However, it’s necessary to give historical context to the subject of affordability. As they explain: “One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the ‘typical mortgage payment.’ It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment… The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home… When adjusted for inflation, the typical mortgage payment puts homebuyers’ current costs in the proper historical context.” Here is a graph showing the results of CoreLogic’s research: As the graph indicates, the most recent calculation remained 28% below the all-time peak of $1,275 in June 2006. That’s because the average mortgage rate at that time was 6.68%. However, this does not mean that buying a house is an unattainable goal in most markets. Members: Sign in now to set up your Personalized Posts & start sharing today!

Flipping Luxury Homes Is Growing in Popularity—For Now® analyzed markets where at least 20 flipped homes sold for more than $1 million from January to October 2018. They defined flip as a home that sold twice for a profit within a year. The markets seeing some of the largest number of luxury housing flips are in California, particularly the Los Angeles, Long Beach, and Anaheim areas, with the percentage of luxury home flips increasing from 3.4 percent in 2017 to 4 percent in 2018. "It was one of the fastest-growing luxury markets last year overall, so it’s a function of sales being higher and growing at a healthy pace, which can result in flips growing at a healthy pace," Javier Vivas, director of economic research at®, told Mansion Global. "The share of inventory above $1 million in Los Angeles is large, too, and above most other markets." International buyers are targeting the area for flips as well, says Santiago Arana, a broker with The Agency in Los Angeles. "Tech companies are moving in, there’s been a gigantic investment in the new football stadium, George Lucas is opening a new museum, and there is incredible growth and development downtown." Luxury home flipping in many markets could taper off though this year, too. Housing analysts point to changes in the U.S. tax code from last year that could make investors more reluctant to take on bigger purchases this year. “We’re already seeing a lot of that with price reductions and increases in the amount and types of price cuts happening above the $1 million mark.”

5 Smart Tips for Successful Long-Distance Real Estate Investing

I recently hosted my monthly Denver women’s investing group, and the focus was long-distance investing, a theme that remains attractive and frightening to the masses. 5 Smart Tips for Successful Long-Distance Real Estate Investing 1. As they see it, time works against appreciation. Had they done more research, talked to more people, and studied more maps, they might have known those neighborhoods had crime and other issues. Still, knowing areas to avoid isn’t the same as being a local. Out-of-state people get routed here, while locals avoid it like the plague. Attend local real estate meet ups. Related: The Core 4 Members Vital to a Profitable Long-Distance Real Estate Investing Team Related: She advises picking somewhere with cheap flights from your location. I find this reaction to be common and was happy to hear it reflected again at the investment group. What has long-distance investing (or researching long-distance investing) taught you?

6 Ways To Get Your Home Ready For A Spring Sale

Selling your home in the spring doesn’t mean you have to actually wait until spring to prepare your home for a sale. “The best way to prepare your home for a spring sale is to open it up, lighten it up and brighten it up,” says Cook. “There was a period of time when people were doing a lot of decorative valances,” says Cook. “For instance, a major kitchen remodel will cost an average of $66,000 but will only add about $41,000 to your home's value with a 62% return on investment.” Think small with renovations. “Rather than replace the kitchen cabinets, just replace the doors or repaint the cabinets instead,” says Dutton. If you're going to spend serious money on anything, focus on the exterior of your home, since this is the very first impression buyers get of your home and it counts.” For instance, she says one renovation that pays for itself and boosts curb appeal is a garage door replacement, which will cost around $3,600 but net a 97% return on investment. Cook says make sure all your lightbulbs are operable to show your home in its best light. “Go around and check all your lamps and light fixtures and make sure that all your bulbs are working.” Paint with whites and neutrals. “You'd be amazed how tiny flaws you've ceased to notice in your own home like a loose doorknob or creaky window can stick out in buyers' minds and make them think, 'What else is broken here?’ says Dutton, adding: “Be sure to make any repairs, particularly to things buyers will notice, but also other things you just know must be done. She recommends having your carpet professionally cleaned before putting your home up for sale.

6 Reasons Why Active Duty Military Should Consider Turnkey Real Estate

In most cases, people are buying liabilities instead of assets—and depreciating liabilities at that. And I truly believe real estate investing is one way both active service members and veterans can create a solid financial foundation—and even achieve financial freedom! What is the Best Real Estate Investing Strategy for an Active Duty Service Member? For that reason alone, any passive income-producing asset, such as a turnkey property, is likely the best option to get started. 6 Benefits of Turnkey Investing “Passive” Investing: This is in quotation marks because there isn’t really a way to be completely hands-off. You can expect 10 to 20% cash-on-cash return from a good turnkey (TK) provider. Remember, the IRS doesn’t have “loopholes” for real estate investors. As your tenant pays down your principal each month (through rent payments), your equity increases—and thus, your net worth. More Investing Strategies to Explore After separating or retiring from service, VA loans are available that can be used to, say, house hack a one- to four-unit building with ZERO down payment and without private mortgage insurance. When done right, it can serve as a passive path to real estate investing for beginners, while providing solid, long-term returns.

5 Simple Ways to Make Your Rental More Attractive in Under a Week

Is your rental property a bit of a dump? Thankfully, these improvements don’t have to be costly or time intensive. Boost the Appeal of Your Rental Property When the bones of a house are good—i.e. So stop complaining that your rental never stays rented, or that the landlords nearby are getting a much higher rate for similar properties, and do something about it. Thankfully, curb appeal is one of the quickest things to fix. Related: 13 Proactive Ways to Increase Rent & Add Value to Your Rental Property 2. Fresh Paint Paint is cheap, easy for the average DIYer, and makes a huge aesthetic difference in the overall look and design of a rental property. This can be done very inexpensively, but will make even the oldest, dingiest spaces instantly look nicer. It also has a way of holding smells and making a rental seem old and worn. New Appliances Few things frustrate tenants quite like faulty appliances that stop working at the worst possible times.

America’s Housing Affordability Crisis Only Getting Worse

A shortage of housing inventory, a deepening construction labor shortage and high land costs are fueling the crisis, according to Robert Dietz, chief economist for the National Association of Home Builders. “We’re definitely in the first half of it.” The NAHB/Wells Fargo Housing Opportunity Index shows that the peak of housing affordability was reached in 2012 when 78% of new and existing home sales were affordable for a typical family based on their incomes and current interest rates. “If rents are high and the rental market is tight, then it becomes harder for those households to save for a down payment and buy a home.” Frank Nothaft, chief economist for CoreLogic, a data analytics company, said lots of people are buying homes, but it has gotten much more financially burdensome for first-time home buyers to buy homes, especially in high-cost markets. Certainly some of them are doing very well income-wise and can afford to buy, but at the margin, it’s become more challenging.” Nothaft said that if you combine the effect of the rise in home prices with the rise in mortgage rates over the last year, that works out to about an 18% increase in the monthly principal and interest payment to buy the same house today that you could have bought last year with the same amount of down payment. “The typical family has not had income growth of 18%,” he said. “Some lucky families had it, but your typical family is not seeing that.” Dietz believes the housing market will continue to have sluggish growth this year in single-family construction and relatively flat apartment construction. That’s really the pivot point where the housing market is at.” Of course, some affordability issues are more complex, Dietz said, driven by geography in some higher-cost markets. “If you’re land constrained because you’re up against water or the market is constrained by mountains, you’re really running low on land, that contributes to the factor,” he explained. “That would include townhouse construction.” Markets that can add housing at an affordable level, particularly entry-level townhouses, are the markets that are going to grow, he said. “Those are the markets that are going to allow young people to establish roots and buy a home and grow a family,” said Dietz.

First-Time Buyers Will Have the Easiest Time Buying Here

Pittsburgh, Cleveland, and Oklahoma City are the best cities for first-time home buyers hoping to jump into homeownership, according to a new study released by LendingTree. The three cities ranked on top of a new list released from LendingTree that stacked the 50 largest metros up against each other based on how friendly they are to first-time home buyers. Cities were ranked on six main factors, including down payment amount, the share of buyers using an FHA mortgage, percent of buyers who have credit scores below 680, and more. Oklahoma City, Cleveland, and Memphis, Tenn., have the lowest overall down payments among first-time buyers of the 50 metros tracked. The average down payment in these three areas is $32,000. That is significantly lower than the average down payment for the top 50 metros, which averaged $50,000. Cleveland, Detroit, and Birmingham, Ala., had the highest share of home buyers with credit scores below 680. “People who live in these cities can probably secure a loan with a lower credit score than they might need in some of the other cities on the list,” LendingTree notes in the study. Overall, Indianapolis, Cincinnati, and Cleveland have the largest share of homes that are affordable for median income families, the study showed.

Millennials Are Undeterred by Fixer Uppers

Young adult home buyers aren’t afraid to buy a home in need of some major TLC. Sixty-seven percent of millennial home shoppers who participated in a recent Clever Real Estate survey of 1,000 U.S. residents in the market for a home said they would put in an offer on a property in need of major repairs. Millennial home buyers are taking a long-term view when buying, the Clever Real Estate survey found. They also tend to value safe neighborhoods and good schools over walkability and short commutes. Young adults also tend to have a fondness for real estate. Eighty-four percent of millennials believe that buying a home remains a core component of the American dream, according to the survey. Furthermore, a 2018 survey from Bank of America found that most millennials prioritize homeownership (72%) over other major life events, like getting married (50%) and having children (44%). The chief reasons cited by millennials want to buy a home are that they need more space, they feel owning is more affordable than renting, and they believe owning a home is a good investment, the Clever Real Estate survey found. “This is where millennial-centric issues like student debt and rising rent prices really factor into the equation,” Clever Real Estate notes in its study. “While Gen Y-ers are, on the whole, earning more than previous generations did at their age, millennial-specific issues like higher costs of living and poor credit are making it difficult for them to break into the market.”

How to Avoid Getting Pummeled at the Top of the Real Estate Cycle

Whether a correction occurs in three months or three years, most investors would agree we’re near the top of the cycle. Related: 5 Reasons I’m Not Worried About the New Real Estate Market Correction This is what caused the housing boom and bust. If you own a good amount of property now, consider selling some. Hold the high cash-flowing stable deals with long-term debt. If you are buying, understand that there are differences between underwriting and structuring a real estate deal. Good underwriting is going to start to matter again. Our “base” case will be 3% rent growth, 2% expense growth, and an exit cap 50 basis points (BPS) above the entry. This is what most would call “conservative” because rent growth the past 5 years has been tremendous and that will definitely continue for the foreseeable future no matter what forever and ever. We will run scenarios based on 55% leverage at a 4.75% interest rate, and 80% leverage at a 5.25% interest rate. But if you can sell the message correctly and get people to understand the concept of risk-adjusted returns, imagine how many happy investors you’ll have when all their friends are taking it in the shorts and your deal is in decent shape?


How to Make an Offer on a Property Not Listed on...

If you are buying a property that is not listed on the MLS, you will probably not be using a real estate agent. Related: The Easiest Way to Find “Off Market” Deals: Pocket Listings Making an offer to a private seller usually begins with a verbal offer, offered in casual conversation. Then, after some negotiation (which I’ll cover later in this chapter), you’ll come to an agreement on price. At that point, you can pull out your official purchase and sale document and sign in all the necessary places to make it official. It’s not a legal document, just a way for both parties to see the summary of what’s being offered. The Purchase and Sale Agreement A letter of intent simply places those facts on one page, so both parties can decide whether an official purchase and sale agreement is worth drafting. You can also check the BiggerPockets FilePlace at for other useful forms and documents.Office Supply Store: Many office supply stores, especially the big box stores, carry P&S agreements along with many other legal forms. Other Investors: Ask around at your local real estate club to see if anyone has the form you need. Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly! Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today!