Help My 43T Friends acheive their Goals

These days, real estate may be a scary investment, but for anyone who would like to own the house they live in, the purchase of the first home may be daunting and elusive.

Not so very long ago, just about anybody could qualify for a home loan, as long as they were willing to assume the risk of a predatory loan. Realtors & loan brokers who should have been more ethical urged buyers who otherwise could not have qualified into those loans, and now there is an enormous mess out there, which makes a lot of people want to stay away.

Remember this: That is their mess not your mess. As long as you obtain a non-adjustable 30 year mortgage at an amount you can pay, you are sitting pretty.

If you long to be one of the “young & the rentless”, here are some tips for how to accomplish that goal.

• Start small. Your first home will not be your dream home, but it will be a very welcome tax deduction. It may not be a stand alone house – you may have to settle for a condo with a deck instead of a garden. If you can see yourself living there, for perhaps five years, it could be a good start. IF the place is ugly, imagine what you can do to make it gorgeous. Remember this: Although the market today is crappy, it will come back, and when it does, competition for starter homes will be fierce. If you have one to unload, you will be ready to ride the wave.
  • Maybe there is nothing you can afford where you have to live to stay sane – that is, close to your urban job. Don’t despair. Consider buying your first home somewhere you would love to escape to, and somewhere other people would also like to vacation. A little cabin in the woods? A condo at a nearby ski area? A lakeside cottage? Somewhere on an island? This is the stuff dreams are made of. Right now, these second homes are the ones people who are in trouble now are having to unload. Prices are all over the board. Pick the vacation area of your dreams, and start looking. If it is to be your “home” and you own no other home, the down payment required may be as little as 10%. And you may be able to get the current owner to carry back a piece of that, if you don’t have the money at hand.
  • If you are waiting to buy, but skeptical about the timing, think through the probable scenarios. Interest rates are on their way down again. This is “the interest rate decline” that will continue briefly due to two things: upcoming general election & necessity for millions of homeowners to obtain financing they can afford. Banks cannot afford to foreclose on 30% or more of their loans over the next 18 months, and that’s what will be going on if interest rates don’t get back down into the 5% range for a period of time. Here’s the catch: once interest rates have reached that low level, there will be competition to buy the most desirable homes, which will drive up prices again. Timing is key. If you find a place to buy now, when there is no competition, you can do several things – see “negotiate with seller”.
  • negotiate with the seller. The market is crappy now. People who have to sell will do what it takes to get their property sold. Say you have $25,000 and the lender wants you to have $50,000 for the purchase. What about a lease option? The way this works is that you pay $25,000 to the seller, and rent the house, with the option to buy within say 18 months. The price is fixed today. The $25,000 you pay counts toward the down payment. Every month, a portion of your rent counts toward the down. So perhaps you agree to pay $3000 a month rent – but $1500 of it counts toward the purchase. By the end of the 18 months, you have paid the full down. And any time during the 18 month period that you can complete the sale, you do it.

    What about offering lots less than the asking price? You can always try.

    What about asking the seller to carry part of the burden? Sellers with equity can do this – carry a portion of the cost of sale for a period of time, in effect carrying a second mortgage on the house.

    Get creative – offer the seller an incentive to sell you the house way below market, with a lease back option. Maybe the house you want is listed at $699,000 and you cannot afford more than $599,000. You really want this house. What if you could buy it for $599K and offer to lease it back to the seller for a similar cut rate for 12 months? The seller may be losing money, but gets to live for very low rent for a year and re-build some of the lost equity in savings on rent. You get the tax write off, which is very attractive. Plus, the tax base for your house goes to the purchase price.

• some caveats: When your purchase pushes the market value down on the house you buy, it can and often does have the effect of lowering your equity in the house. In other words, in a slippery market like this one, if you buy into a small community, and pay substantially below CMV, the price you pay re-sets the values for the neighborhood. It takes years for neighborhoods to recover. So if you are looking to build equity, you are better off paying asking price and helping to stabilize the market instead of helping push the market down.

• The way the tax deductions work for property ownership may vary from state to state in the US. For Federal income tax, you get to write off your mortgage interest on the home you own and live in. You get to write off the mortgage interest on a second home too. For your rental, providing you don’t make so much money you have to declare a passive loss, you write off the interest, then when you figure your income/loss, the mortgage cost is figured in again, along with portions of the cost of furnishing and maintaining the house. So your tax savings on a rental can be huge, if you keep it rented a lot. For that, it is wise to use a rental manager who treats you as a valued customer.

Good luck to all of you out there seeking a home you can call truly your own. I love not having a landlord. I love being able to do what I want to my home. I love the neighbors. I started with a condo, and could never have gotten anywhere in the housing market without starting small and basic.

This is National Rain Forest Week. Radio station KDFC in the bay area is celebrating, and so are we, on 43Things.

The beautiful thing about celebrating National Rain Forest Week is that in doing so, you help raise awareness about the role of the rain forest in maintaining the ecological balance of the planet.

Did you know that in stopping deforestation, we would be taking the single most cost effective and significant step in slowing global warming?

you are invited to adopt the goal: celebrate National Rain Forest Week

The tiki bar is open – bring your friends and come over!

Under the goal “Do NaNoWriMo” I am posting entries with ideas about preparation before November 1.

I anticipate that during the month of November, my visits to 43T will be fleeting at best.

But for now, getting ready for this goal has caused me to sharply focus on setting everything in place before I begin to write. And that is very new to me.

I cannot begin to say how helpful this is becoming – I will most likely do this in advance of all writing projects henceforward.

This is an invitation to anyone sharing this goal and NaNoWriMo as well to visit the “Do NaNoWriMo” goal and the entries about getting started.

Becoming Fit in one form or another is a common goal.

In becoming more and less fit over the years, what has helped me in the past has been walking buddies.

Walking daily or habitually

Walking hills at lunch time. If there are no hills, find stairs.

Walking first thing in the morning, at least a mile.

Walk when you get home from work. Walk with your partner, your neighbor, your dog.

Get a pedometer and measure your steps. Aim for 5000 steps a day, and when you have reached that, go for 10,000 steps. 10,000 steps a day will make you fit.

12,000 steps will bring you to your ideal weight and make you fit, if you do it and do it.

Does this sound like a lot? Try it. With the pedometer measuring your actual steps, you may be surprised. First at how little you actually walk, and second at how easy it is to change walking a little to walking for health and fitness.

I bumped into this website today looking at homes on forsalebyowner.com. see below for commentary.

There was a listing there for a single family residence in Pleasanton, at about 1/3 market value. It was from this list.

Part of this entry was in my comment. Some interesting synchronicity happened here because I was going to write a very similar goal, which was forming in my mind, along the lines of this goal. And at the same time, I was in my e-mail, and here was an invite from gemmword to join in this goal.

So here we are, and here is what was on my mind:

I have a particular point of view on reaching goals. It is about adjusting one’s personal belief system.

What I see and have experienced is that the one huge hurdle in most goals is belief. If you look at big goals and people’s comments, you will see generally two kinds of comments.

Either the comment is about how impossible the goal is (right now) and how someday this goal will hopefully come within reach. Or the comment is about the excitement generated by the goal and the sense that the goal is within reach.

I have spent a lot of time in my life taking steps to be in the mind set of keeping my goals within reach, and I would be totally happy to share techniques and strategies with anyone who is interested.