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This is a great weekly newsletter distributed by my favorite lender.
Tuesday, August 22, 2006
Sunday, July 23, 2006
Priced out of the real estate market?
Priced out of the real estate market? You’re not alone. Many hard working people just like you, can’t afford a median priced home by themselves either.
Don’t fret, there may still be a way. If you haven’t already considered doing so, think about buying with a trusted friend, colleague, or family member.
If you don’t, you may very well be resigning yourself to renting forever. Even though there is a possibility of conflict, you can easily limit these by crafting a well detailed contract defining each party’s roles and responsibilities.
When choosing your house partner remember, that you are probably making the largest purchase of your life and most likely taking yourself and your partner into debt for the next 30 years or more. So it makes sense that if your partner is already under a high debt load, your relationship may easily become strained. A clear credit record should be a priority when choosing any investment partner.
Of course its best if each of you has a credit score of 700 or more. If that’s not the case, you’re not out of luck yet. Just be aware that you’ll end up paying a little higher interest rate on your home-loan.
If scores are a bit on the middle to low end, it may be best to delay shopping for a new home for a little while, to give time to pay down credit card debt, while paying bills on time. This should raise your score enough to score a more palatable loan.
Consulting an attorney regarding your partnership would be a very good idea too. You’ll need to begin make decisions about how to hold title to the house. This typically will be Tenants-in-common, where each of you owns a certain percentage of the property, usually 50%. Another option might be Joint Tenancy with right of survivorship. It is imperative that you each do some estate planning also. You’ll need to decide what will happen to the property if one or both of you should die. Depending on how you choose to hold title, one owner may sell his or her share of the property without your consent or knowledge. Also, if a family member inherits a portion of the property by will, you might end up co-owning with someone you wouldn’t otherwise choose.
A written agreement spelling out the terms of your co-habitation is immensely important for your own sake and peace of mind, also to establish procedures in case of a dispute or planned conversion of the property. It doesn’t always happen that both investors will live in the property, but since most people’s decision to buy a home is based on a place to live, it usually works out that way. If one of you is looking for a strict investment vehicle, an agreement to rent, lease, or provide some other consideration for a partner’s share can compensate for not moving in.
In your written agreement, You’ll want to make sure you cover;
Most of all, make sure each of you can guarantee that you’ll be able to pay your share of expenses. An article by Suze Orman, suggests creating a joint checking account and for all housing costs and, setting up direct deposit so your share will always be in the account every month. At least once a month, sit down together on a set day, and pay the bills. Make sure each of you has ample emergency cash on hand (at least 3 months each) to handle any unexpected expenses.
Figure out ahead of time, how you’ll end the relationship. You know it will happen eventually, so why not spell it out, so there are no surprises. Plan for every aspect of your split. Will you buy out your partner, or vice versa? Will you sell and split the proceeds? These things should be in a written contract to avoid problems.
If you plan ahead, choose your partner wisely, and follow some simple rules, you’ll end up a homeowner, build your wealth, and live happily-ever-after (probably).
Don’t fret, there may still be a way. If you haven’t already considered doing so, think about buying with a trusted friend, colleague, or family member.
If you don’t, you may very well be resigning yourself to renting forever. Even though there is a possibility of conflict, you can easily limit these by crafting a well detailed contract defining each party’s roles and responsibilities.
When choosing your house partner remember, that you are probably making the largest purchase of your life and most likely taking yourself and your partner into debt for the next 30 years or more. So it makes sense that if your partner is already under a high debt load, your relationship may easily become strained. A clear credit record should be a priority when choosing any investment partner.
Of course its best if each of you has a credit score of 700 or more. If that’s not the case, you’re not out of luck yet. Just be aware that you’ll end up paying a little higher interest rate on your home-loan.
If scores are a bit on the middle to low end, it may be best to delay shopping for a new home for a little while, to give time to pay down credit card debt, while paying bills on time. This should raise your score enough to score a more palatable loan.
Consulting an attorney regarding your partnership would be a very good idea too. You’ll need to begin make decisions about how to hold title to the house. This typically will be Tenants-in-common, where each of you owns a certain percentage of the property, usually 50%. Another option might be Joint Tenancy with right of survivorship. It is imperative that you each do some estate planning also. You’ll need to decide what will happen to the property if one or both of you should die. Depending on how you choose to hold title, one owner may sell his or her share of the property without your consent or knowledge. Also, if a family member inherits a portion of the property by will, you might end up co-owning with someone you wouldn’t otherwise choose.
A written agreement spelling out the terms of your co-habitation is immensely important for your own sake and peace of mind, also to establish procedures in case of a dispute or planned conversion of the property. It doesn’t always happen that both investors will live in the property, but since most people’s decision to buy a home is based on a place to live, it usually works out that way. If one of you is looking for a strict investment vehicle, an agreement to rent, lease, or provide some other consideration for a partner’s share can compensate for not moving in.
In your written agreement, You’ll want to make sure you cover;
- Expectations of each party
- Terms of sale should either of you decide to sell
- How each of you will contribute to the mortgage payment
- Any other occupants, relatives, roommates, loved ones, etc.
- Who will be responsible for maintaining various aspects of the property.
Most of all, make sure each of you can guarantee that you’ll be able to pay your share of expenses. An article by Suze Orman, suggests creating a joint checking account and for all housing costs and, setting up direct deposit so your share will always be in the account every month. At least once a month, sit down together on a set day, and pay the bills. Make sure each of you has ample emergency cash on hand (at least 3 months each) to handle any unexpected expenses.
Figure out ahead of time, how you’ll end the relationship. You know it will happen eventually, so why not spell it out, so there are no surprises. Plan for every aspect of your split. Will you buy out your partner, or vice versa? Will you sell and split the proceeds? These things should be in a written contract to avoid problems.
If you plan ahead, choose your partner wisely, and follow some simple rules, you’ll end up a homeowner, build your wealth, and live happily-ever-after (probably).
Friday, July 14, 2006
Condo Conversions Affect Median Price
The political heat may soon be off of condo converters. In the City of Los Angeles, protests have followed would-be converters in an effort to stifle the putting-out of renters. Many of whom are paying rents well below the market averages for similar apartments.
An out-of-work actor, Gary Watts told LA Times reporters, that he is being kicked out of his $950 a month, 2 bedroom apartment (which, if not in a rent control district would command $1800- $2000 per month) and has lived in for the last 15 years. He says his apartment building is being converted to condos which will be offered for sale at or around $500,000. A price he cannot afford.
While protestors badger real estate investors, (with little effect) it’s reported that condo conversions are down, and continuing to slow. The Director of USC’s center for real estate, Delores Conway cites, rising interest rates and a slowing market.
“The speculators are gone”, she said. The argument made by protestors is that converting apartments to condos removes low-cost housing from the city and are seeking a moratorium on conversions. The other side of the argument is that many conversions are purchased by the units previous tenant which, puts them in a better position.
Condo conversion are a necessary evil in the Real Estate world. Recently converted condos are usually sold at prices significantly lower than their established counterparts. This of course means ‘affordable housing’ for those who would not otherwise be able to afford a real estate purchase. On the other hand, though, a large number of condo conversions has an adverse effect on the local real estate market by artificially lowering the median price of homes, which, in turn, makes it appear that the market itself is either slowing or in some kind of trouble.
Evidence of this is shown by looking at markets where condo conversions have been frequent and in large numbers. Ignoring Los Angeles for a moment, San Diego, reports a 1% decline in their median price. An indicator that the market is falling. According to another Gary Watts of Orange County, this is a false indicator. In the past months and years, condo conversions in San Diego were prominent. Those units sell, again, at rates lower than established units lowering the entire median. The real estate market according to Sheila Anderson, a real estate agent, “there’s a lot of inventory”, the real story is that the market has stabilized.
In Long Beach, property values have continued to climb. In fact the property values in Long Beach increased 12.6 percent in the last 6 months. The indication there, is that this market is strong. In the city, there are quite a few new construction projects, condos and homes, especially in the downtown area. Condo conversion has been relatively light, so, we’re not as affected by false medians. According to the Los Angeles County Tax Assessor, Long Beach has shown the highest growth rate of all the 10 Los Angeles County cities with the highest property values.
An out-of-work actor, Gary Watts told LA Times reporters, that he is being kicked out of his $950 a month, 2 bedroom apartment (which, if not in a rent control district would command $1800- $2000 per month) and has lived in for the last 15 years. He says his apartment building is being converted to condos which will be offered for sale at or around $500,000. A price he cannot afford.
While protestors badger real estate investors, (with little effect) it’s reported that condo conversions are down, and continuing to slow. The Director of USC’s center for real estate, Delores Conway cites, rising interest rates and a slowing market.
“The speculators are gone”, she said. The argument made by protestors is that converting apartments to condos removes low-cost housing from the city and are seeking a moratorium on conversions. The other side of the argument is that many conversions are purchased by the units previous tenant which, puts them in a better position.
Condo conversion are a necessary evil in the Real Estate world. Recently converted condos are usually sold at prices significantly lower than their established counterparts. This of course means ‘affordable housing’ for those who would not otherwise be able to afford a real estate purchase. On the other hand, though, a large number of condo conversions has an adverse effect on the local real estate market by artificially lowering the median price of homes, which, in turn, makes it appear that the market itself is either slowing or in some kind of trouble.
Evidence of this is shown by looking at markets where condo conversions have been frequent and in large numbers. Ignoring Los Angeles for a moment, San Diego, reports a 1% decline in their median price. An indicator that the market is falling. According to another Gary Watts of Orange County, this is a false indicator. In the past months and years, condo conversions in San Diego were prominent. Those units sell, again, at rates lower than established units lowering the entire median. The real estate market according to Sheila Anderson, a real estate agent, “there’s a lot of inventory”, the real story is that the market has stabilized.
In Long Beach, property values have continued to climb. In fact the property values in Long Beach increased 12.6 percent in the last 6 months. The indication there, is that this market is strong. In the city, there are quite a few new construction projects, condos and homes, especially in the downtown area. Condo conversion has been relatively light, so, we’re not as affected by false medians. According to the Los Angeles County Tax Assessor, Long Beach has shown the highest growth rate of all the 10 Los Angeles County cities with the highest property values.
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