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Buying a Home is 38% Less Expensive than Renting!

by Joanne Hiller

In Trulia’s 2014 Rent vs. Buy Report, they explained that home ownership remains cheaper than renting throughout the 100 largest metro areas in the United States; ranging from an average of 5% in Honolulu, all the way to 66% in Detroit, and 38% Nationwide!

The other interesting findings in the report include:

Even though prices increased sharply in many markets over the past year, low mortgage rates have kept home ownership from becoming more expensive than renting.

Some markets might tip in favor of renting later this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering.

Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

Bottom Line

Buying a home makes sense. Rental costs have historically increased at a higher rate of inflation. Lock in a mortgage payment now before home prices and mortgage rates rise as experts expect they will.

Should You Help Your Child Buy a Home? Here are Some Options.

by Joanne Hiller

The real estate market's a tough place for first-time buyers. Young home buyers often lack the savings for a down payment and tougher lending criteria means that some cannot qualify for a mortgage. Traditionally parents have helped their children mount the property ladder by giving them cash for a down payment. If cash is in short supply, other options include co-signing a home loan or arranging a lease-to-own scenario.

Help With the Down Payment
The simplest way you can help your kids financially is by giving them cash to increase their down payment. A bigger down payment typically means lower interest rates, more deals to choose from and a more lenient lending criteria. Aim for a deposit of at least 20 percent of the home's value. If you're giving your child down payment money, plan on losing that money and not getting it back. Lenders prefer the money to be a gift, because if the parents treat the cash as a loan, it is considered a second mortgage on the property. Keep your dollar advance below the annual gift tax exemption limit, and you shouldn't run into any tax problems.

Buy the Home as an Investment and Have the Kids Pay Rent
Parents own the real estate, which they can sell to their children when their ready, keep as an investment, or sell to someone else. Do the sums before you consider this option. If you need a mortgage, you'll have to come up with a larger down payment than you would for your primary home, typically 30 percent. Like any landlord, you'll have to pay the mortgage regardless of whether your tenant pays the monthly rent. Moreover, this approach may be great for you but it doesn't do much for your kids. They don't get a stake in the house and they're not really building up any responsibility.

Lease-to-Own
A lease-to-own arrangement is also known as a land contract or purchase installment contract. Under this arrangement, you essentially act as your child's mortgagee. You buy the home and give your child immediate possession, and he or she pays you the purchase price in agreed installments. When they've paid you back in full, the home is theirs. A lease-to-own arrangement requires specialist tax advice and must include a written contract.

Co-Sign the Loan
If your child has a low income, low credit score or a poor credit history, co-signing their mortgage may get them past otherwise prohibitive lending criteria. This isn't for everyone though. If your child doesn't make his or her mortgage repayments, the bank will come to you. You'll have to be able to afford any outstanding mortgage on your own home, as well as your child's mortgage payments if they can't or won't pay. Making good your child's delinquency may have a devastating effect on your credit and cash flow, so if your child cannot get a loan in his or her own right, ask yourself why before you agree to co-sign the loan. If they're in a starter job and simply haven't had the time or the income to establish a credit profile, they may be worth the risk. If they can't get a loan because they have a history of credit card defaults and late bill payments, the chances are they'll default on this loan too.

Buy Jointly
Two or more incomes increases your child's buying power, but you take on 100 percent liability for the loan. If he or she misses a payment, the lender may ask you to make good the default. There may be tax implications too, especially if the property isn't your main home. On the plus side, you'll both own a stake in the house. You can agree to split any capital appreciation in whatever percentage you choose, if the home is later sold.

7 Mistakes to Avoid when Investing in Real Estate

by Joanne Hiller

There is money to be made in real estate, but you need to think about real estate investing as the business it is. Here are some common mistakes that beginning investors should avoid.

1. Getting emotionally involved.
This is the biggest and most common mistake beginning investors make. Emotions and business do not mix well. In this case, falling in love with a property will almost always ensure that you pay too much to make it profitable.

2. Paying too much.
To make money investing, you have to find a good deal. Look for properties that need a little fixing up. Your goal is to find a distressed property that you can purchase for around 70 percent of comparable listings.

3. Ignoring schools.
Good schools attract good renters. Conversely, only the most desperate renters are willing to subject their children to failing schools. And renters in desperate financial situations are not renters you want occupying your property.

4. Buying a low-priced home in a bad neighborhood.
Property that is situated among vacant or foreclosed homes will not be enticing to future renters. Property in neighborhoods that experience vandalism and other crime is not worth the investment. Before you buy, make sure that this is a neighborhood that renters will want to live in.

5. Putting too much of your own money down.
This is not your home; it is your investment. As such, you should choose a property that will bring enough rent to cover the mortgage even if you put little money down. When you keep your funds liquid, they are available for emergency repairs and upgrades.

6. Forgetting to calculate taxes.
Sometimes high property taxes mean that your rental property is in an area with great schools and other quality infrastructure. However, sometimes it simply means the area is overtaxed or has poorly managed local government. If your proposed rental property includes high property taxes, make sure that the area’s desirability compensates for the extra cost.

7. Disregarding local trends.
Check out the area’s employment opportunities. Are they growing or shrinking? Find out about any scheduled future development. Is the area adding parks, shopping, or even a public transportation hub? Proposed new condominiums and apartment complexes could indicate a growing community, which is good news. However, new condos and apartments also mean competition for the best renters. Weigh the pros and cons of local trends before you invest.

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Contact Information

Joanne Hiller
Coldwell Banker Residential Real Estate
110 Island Way
Clearwater FL 33767
(727)460-5721
Fax: (727)446-2691