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There are many would-be homeowners out there that have been misled about their ability to afford a home in Boston. We have some of the highest real estate prices in the country and the misconception that you can't purchase a home without 20% down has led a lot of people away. Here are five mortgage programs that require significantly less out of pocket money.
Mass Housing Home Mortgage
Mass housing loans is a state-funded program to help homebuyers within Massachusetts. Mass housing allows buyers to purchase a home with a minimum of 3% out of pocket. The big benefit of mass housing is that you do not pay PMI on these loans. The downside to mass housing is that there are income qualifications and you do have to take a first-time home buyers course to be eligible for the loan.
FHA Mortgage Loans
FHA (Federal housing administration) home loan programs are probably the most popular throughout the country for individuals who are not capable of placing a 20% down payment. The FHA loan program allows for a 3.5% down payment and a minimum credit score 580. If you're purchasing a home for $400,000 the down payment or an FHA loan would be roughly $14,000, opposed to $60,000 if 20% was required. You do however pay a little more for the ability to put less down. An FHA loan requires you to pay PMI (or private mortgage insurance). This is insurance the government makes you pay for not having a loan to value of 80/20. Once your home appreciates, or your debt is paid down to a point we are mortgage is 80% or less of your home's value, you can refinance out of the FHA loan and remove the PMI requirement. Another positive of the FHA program is that it allows family members to help you contribute to your down payment.
A 203k loan is similar to an FHA loan with an added bonus. The 203K loan allows you to borrow additional funds to make repairs to the property you purchase. For example, you can purchase a home for 300,000, and borrow an additional 30,000 for a kitchen and bathroom makeover.
5% Down Conventional Mortgage
There are also conventional mortgage programs that allow for a 5 to 10% down payment. There are no homebuyers courses, income restrictions or PMI to pay, that you may receive a slightly higher interest rate.
VA (Veterans Administration) Home Loans
VA helps Service members, Veterans, and eligible surviving spouses become homeowners. VA does not require a down payment to purchase a home. If your income qualifies you can finance 100% of the cost of your home.
Real estate has made more millionaires in the United States than any other investment class. So why doesn't everyone invest in real estate? Simple answer. Real estate investing is not for shortsighted individuals. It's a marathon, not a sprint. It takes patience, dedication, commitment, and hard work over a long period of time to be successful in this business. Unlike the stock market, real estate doesn't appreciate overnight. You tend to see the benefits (appreciation, cash flow & debt reduction) slowly year-over-year, but with a lot more consistency and stability than the stock market.
We live in a world where people are addicted to instant gratification. If they can't have it today, tomorrow or this week than it doesn't interest them or hold their attention. That's not the way it works with real estate investing. You have to be able to think long-term. You have to be able to make a few sacrifices today to live a better life in the future. You have to be able to look 10 - 20 years down the line and say "this is the life I want to live and real estate can get me there". Most people never stop to think about where they will be or what they'll be doing 10 years from now. Will you?
Real estate can be expensive, a lot of work, and difficult to acquire. Partnering with another investor can be an excellent way to break into the business or continue your portfolio growth. But before you grab just any partner, here are four factors you must consider.
What is your timeline? When investing in real estate with a business partner important consideration is your investment time. For example, if you are age 55 and investing for cash flow to supplement your retirement while partnering with someone age 35 who is investing for long-term appreciation and portfolio growth, this partnership may not work out. You may be looking to sell the property and cash out in 10 years while your younger partner may be looking to hold on a bit longer. Not to say that you can only invest with people your age, but this is definitely a discussion you should have from the start of your venture. Even business partners of the same age should have the timeline discussion.
What are your investing goals? Are you investing for cash flow or appreciation? Are you looking to invest in the city or suburbs? Locally or out of state investments? Are you looking to be active or passive with your rental property? Are you looking to buy a couple of properties or build a large portfolio? These are some of the questions you and your potential business partner should ask each other before putting a deal together. If you, for instances, want to self-manage a couple multifamily homes, while your potential partner wants to purchase a 50 unit building in a neighboring state, there is going to be a disconnect down the road.
Is this an ethical person? There are a lot of choices to make when dealing with investment real estate and you must know that your partner is making decisions that are ethical, moral, and within the law. Is he or she creating a win-win when dealing directly with a seller? Does he or she avoid discriminatory practices when dealing with tenants? Is he or she truthful when dealing with loan officers? The things your partner does or doesn't do will directly affect real estate and the relationship you have together.
What does each of you bring to the table? Experience, cash, and time are the three big factors that any one partner can bring to the investment table. You may have one partner who has years of experience investing in real estate but lacks the additional investment capital for the current deal. If you partner this individual with someone who has cash and wants to learn more about the business, this may be a match made in heaven. What are your strengths and weaknesses? What about your potential partner? Have this critical conversation early on in the process. One person brings significantly more to the table than another partner, this doesn't necessarily mean the partnership won't work. Maybe the equity ownership within the property is divided accordingly.
If you're a landlord in the Boston area and you have a vacant unit currently or becoming vacant in the coming months, myself and the Mandrell Company would love to help you fill that vacant unit with a qualified tenant.
We do so completely free. There is no cost to you the owner or landlord. We start off by advertising your rental unit for lease. We help you show the apartment so you are not using your valuable time standing around waiting for potential tenants. We take care of that for you as well.
Once we find an applicant who we feel is qualified, based on the criteria that you've presented, we then do background checks, credit checks, employment verification, and several other background checks to make sure that that person is qualified and they are who they say they are.
Once we gather all that information we then present you with a full package on that tenant. If you deem that tenant qualified and the person that you're looking for we move forward with the lease signing process and if not we put the unit back on the market and proceed to find another qualified tenant.
We also, again, assuming the tenant is qualified, draft the lease for you, collect all the first month fees, security deposits and anything else that you were asking for and then assist you and the tenant through those first few days of keys, lease signing and various other things that need to be taken care of at the time.
If you do have a vacant unit, if you are looking to fill a vacancy we would love to work with you. You can contact us at 617-297-8641. You can also reach us at email@example.com. We look forward to working with you. Thanks.
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In this video, Patrick Wheeler of the Mandrell company shows you how to easily determine whether your real estate investment is profitable. He takes you through a simple to use rental property deal analyzer that allows you to determine return on investment, cap rate, cash on cash return and several other investment measures. Great investors know that your money is made during the purchase. Use this terrific calculator to make sure you fully understand your investment on the way in. Download now with the link below.
If you're looking at realtor.com. If you're looking at Zillow or Trulia and you're looking through homes and you ... Or you're looking on MLS through your real estate agent's news feed and you're wondering exactly how you could calculate the mortgage on this. You really don't want to keep going back and forth to your mortgage broker. You really want to be able to calculate or get a good idea of what your mortgage payments may be on your own, then you can use this mortgage calculator.
This mortgage calculator can be found at the bottom of our website. This is mandrellco.com. Scroll all the way down to the bottom of the page, and one of the resources is the mortgage calculator. It will bring you to this page right here.
Let's assume we're going through a scenario, you are buying a $300,000 home. I'm going to put in $300,000. Again, there are so many different variations of this that you can go through. It's really going to be something that you'll have to discuss with your mortgage broker, with your real estate agent. Find out what program is best for you.
Let's say you're in a conventional mortgage and you are putting 5% down, 5% of 300,000 is $15,000. That's the down-payment. In terms of the interest rate, they're asking you, "What is your mortgage interest rate?" If you've spoken to a mortgage broker already, you should have a very good idea of what interest rates are currently and what you could expect.
If you have not and you just really want to play around with it, what you could do, and what I've done, is just basically went to Google and just typed in average mortgage rates. This is what's come up in the search. I've scrolled down here and I've just basically seen 30-year fixed mortgage rate as of January 2nd, 2017, is approximately 4%, but a little more. You can click on that, it will bring up Zillow. You could see what interest rates are being offered through different banks.
Again, if you have stellar credit, your number, or your rate may go down. If your credit is less than stellar, that number may go up a little bit more. If you're putting a substantial amount down, that number may go down. If you're putting the minimum down, say, 3 or 3.5% in an FHA or mass housing loan, then that number may go up just a tad.
Let's use a number of let's say four and an eighth today just to see where we are, 4.125. We're going to stick with a 30-year fixed. PMI is primary mortgage insurance. Again, when you speak to your mortgage broker, if you're on a Federal Housing Administration loan or an FHA loan, you will have PMI and your mortgage broker would be able to tell you exactly what that is.
If you are purchasing a condo, most likely on your MLS listing or where you're pulling the information from, you will be able to pull the condo fee. You can plug that number in as well. If it's a single family home or a multi-family home, it probably will not have a condo fee.
The taxes are usually listed right on your listing sheet as well. For this example, let's plug in $25,000. Insurance is not typically listed. Rule of thumb. Again, this is not a hard and fast number, but just to give you a general idea. In Massachusetts, I usually use a number of about a half a percent.
In this case, let's say we're purchasing a half a percent of the home value. In this case, it's 300,000, we're purchasing at 300,000. One percent would be 3,000. I'm going to say a half of that is 1,500 bucks for my home insurance. I'm going to take all these number, $300,000 purchase price minus my 5% down, which means I'm financing 285 over 30 years at four and an eighth. I'm going to pay taxes per year of $25,000, a little over $200 a month. I'm going to pay insurance of $1,500, or a little over a hundred dollars a month.
I calculate my payment. You're going to have a principal and interest payment of 1381. If you escrow in. What that means, if you pay all your taxes and insurances with your mortgage payment, which is most common, you're going to have taxes and insurance for a total payment of 1714.59.
If you bought a house for 300,000 and put 5% down over 30 years at this particular interest rate with these taxes and these insurance, this is what your total mortgage payment would be. This is an excellent way for you to play around with it. If you say, "You know what? I can afford up to about $2,000 on my own. I feel comfortable paying of about $200,000 on my own." You can now adjust this and go 325, would put me up at about 1835. 375 may put you just over $2,000. Maybe 360 is somewhere where you really want to be.
Maybe you're looking at homes in the 375 range with the idea of possibly negotiating your way down to a 360 mortgage payment hoping to land a total payment of no more than $2,000 a month where you're comfortable.
Hopefully this was helpful. Again, you could access this calculator one of two ways. You could go to mandrellco.com, scroll all the way down the bottom of the page and capture the mortgage calculator, or click on the mortgage calculator. In the description of this video, there is also a link to this calculator as well. Hopefully this was helpful. Talk to you soon.
Thanks for watching our video. Did you find this information useful? If so, please remember to like the video and also subscribe to our channel for more useful information.
I would also encourage you to share this video with your friends and family. Thanks again and we'll talk to you soon.
How do I sell a home if it needs significant repair? If by significant you mean you have foundation issues, there's water damage, the roof is bad, you have bad tenants, it would be a bad situation. In that case what you're looking for is you don't want your typical realtor, you don't want your typical buyer. Typical realtor, typical buyer is probably going to present you with a sign in the yard, open house, a lot of people doing showings, coming through your property. That's probably not what you want. It's probably not a safe environment, it's probably not an environment that you want to have a realtor coming in and taking photos of and posting them all online.
What you are looking for in your situation if it's a home with significant repair needed is a renovation specialist. You're looking for someone to come in who understands how to buy homes that need repair, that have their own money, that doesn't need a bank appraisal. These renovation specialists are also not going to do home inspections. They can close quickly if that's what you're looking to do. They are professionals at renovating homes that need a lot of work. At the Mandrell Company, we have a long list of these professionals, professionals that we're working with and contacting on a regular basis.
If you are in need to sell a home or if you are in possession of a home that needs significant repair, you are looking to sell, we would love to connect you with these professionals. They are looking to create a win/win situation. They want to make sure that everyone involved, as well as the Mandrell Company, we want to make sure everyone involved comes out on the other end satisfied, happy with the solution that was achieved. These renovations specialists can make you an offer on your property within 48 hours. The offer would be cash. Again, they can close quickly if that's what you need.
If you do have an interest please give us a call. You can reach us at 617-297-8641 or you can contact us through email at firstname.lastname@example.org. You can also visit our website at mandrellco.com or the easiest way would be to click on the link below in the video description or the learn more button to your lower right-hand side. Again, we'd love to work with you. Hopefully, we can come up with a win/win solution for your home if it needs significant repair. Please reach out to us and we'll see what we can do. Thanks.
Thanks for watching our video. Did you find this information useful? If so, please remember to like the video and also subscribe to our channel for more useful information. I would also encourage you to share this video with your friends and family. Thanks again and we'll talk to you soon.
How To Think Like An Investor When Purchasing Your Home
Friends and family come to me all the time asking my advice on how to make sure they are making a good investment when they buy a new home. Some home buyers inadvertently luck out, buy in an area that happens to explode within a few years of their moving there, make a few improvements, and sell their home for twice what they bought it for just a few years prior. This is wonderful when it happens, but it is largely due to luck and timing. Other buyers get the short end of the stick and find that their home has not gained any significant value in the last 4 years and they are hardly going to break even after closing costs.
Many people don’t realize that buying a single family home to occupy is not likely to be an investment per se, meaning you are not likely to actually make much money on it, unless you are smart about it. You can’t control the market, but you can try to avoid making a bad purchase by following a few simple guidelines.
1) Plan to live in it for more than 6 years. If you are not sure you are going to stay long term, it might not make financial sense to buy unless you are doing so simply because you want to have your own place where you are the boss and might have a better quality of life than in a rental property. However, you shouldn’t count on making any money when you sell. Depending on appreciation in your area, your home might not gain value fast enough to make up for the large chunk of money you will spend on closing costs when you sell. Plus you will be spending money on maintenance and up-keep while you are living there—if you don’t, you can certainly expect your home to lose value due to wear and tear. Depreciation is just as real a factor as appreciation.
2) Never buy a $500k home in a town with a median home value of $200k. If you want your home to sell quickly and for a good price, buy at or below the median value for your area. There is nothing more frustrating than trying to sell a home that is too expensive for the average homebuyer. If most buyers in your neighborhood are looking for a 3 bed 2 bath home in the $200k range and yours is a 5 bed 3 bath home for twice as much as the typical buyer in your town can afford, it is probably going to take longer to sell. When you get farther out of the big cities, real estate markets are not so fast and furious and salability becomes a real concern.
3) It is always better to buy the worst house on the best block, than vice versa. As the old adage goes “location, location, location”: if you want your home to gain value and sell quickly for a good price when you move, buy somewhere everyone wants to be. Even if I am a hundred miles away and have never been to any of the towns my friends are considering moving to, I can pull some data on crime rates, appreciation rates, median home costs, school ratings, types of architecture and how educated the population is within a couple minutes and tell you which town is a better bet in terms of resale value.
4.) Finally, buy a house in which value can be added. If a house is perfect already, someone else is making money on you. If you want to think like an investor, buy a house in need of cosmetic updates, or a foreclosure. Plan to do some projects, and while you might have a few more headaches than the buyer of the move-in ready home, you will be glad you did when you make money on the other end.
Let's talk about converting your multifamily into condos. What does it entail, who are the people you need to speak to, what are the things that you need to consider? I have a lot of clients that often come to me and say, "I have a two-family, I have a three-family, I have a four-family and there are some condos selling in my neighborhood, and I'm considering instead of selling my multifamily as a multifamily, what do you think about converting this building into condos and selling them off individually as condos? A couple things. I'm going to go over five things that you want to consider, five people that you want to speak to and get their advice before you make that final decision.
Number one, the number one person you want to speak to is your local real estate agent, a real estate agent that is versed in the multifamily, in condo sales within your market, within your neighborhood. What you're trying to find out from that real estate agent is two things. One, "What would my multifamily building sell for if it sold as a whole, as a multifamily building?" The second number is, "If I break this into two units, or three units, what are those individual condos going to sell for?" That seems pretty elementary, pretty straight forward. Of course you want to know that. In addition to that what are the things that need to be done to these condos? What are the quality of the finishes within these condos that are required for the sale?
Again, if I'm renting ... Right now if I live in unit one and I'm renting units two and units three, and I have laminate flooring and formica countertops and Home Depot cabinets, is that okay for this neighborhood? Is it a requirement for me to upgrade now to granite, to hardwood flooring, to stainless steel if I'm going to convert these into condos? What is the quality of the finishes needed for me to actually put a finished product on the market and actually have them sell?
Once you get those two comparisons. Let's throw some numbers out there and let's say we're in a Cambridge market, let's say it's a three-family unit, and I can sell my multifamily for, let's say, a million bucks. I'm looking at the condos in the same neighborhood and the condos are selling for let's say six hundred apiece. This a pretty good spread. You have a million bucks as a multifamily. You have almost 1.8 million dollars in sales as a condo conversion. Most people would say, "Pretty straight forward."
There's a couple other considerations that you have, though. Next what I would do is I would talk to my general contractor. There's a couple different ways ... I'm going to give you the five people that you should speak to. The real estate agent I would say is always first and then you can toggle through the next four. I would probably bring in my general contractor next and say, "I've spoken to my real estate agent and I'm considering going the condo route. Here are the things that I want to do. Based on what my real estate agent is telling me, I need to probably gut this kitchen and we're gonna go new flooring, new hardwood. We're gonna bring in stainless appliances. I want new plumbing. I'm probably gonna change out a couple furnaces in the basement. I'm gonna separate these into different utilities for each unit.
Based on those things, what is that full renovation budget gonna run me?" Have your contractor come in, give them the specs, and then have them give you a proposal, a contracting proposal so you know exactly what you're getting yourself into. The reason you want to do that is because, again, there's an $800,000 spread between selling it as a multifamily and selling it as condos, but if you come in and your contractor says it's gonna cost you about a half a million dollars to convert these into condos, is there still an 800. Now there's only a $300,000 spread.
The other things you want to consider, $300,000 spread still a lot of money but, again, there are realtor fees, there are three realtor fees because you'll be selling three condos. There are attorney fees. There would be three attorney fees because you're selling three condos. There is also a bit of a home warranty, and you as a developer, or you selling these condos also have to make some type of guarantees. It's not guarantees but some type of warranty to the end buyers. If the utilities break down, if the furnaces break down, those end condo buyers are going to be looking back to you. There are a lot of considerations there.
The next person I would speak to is an architect. The reason you would want to speak to an architect is because when you are going from a multifamily to a condo, in your condo docs you are going to need floor plans and the floor plans are going to lay out specifically which units own how much square footage, and then typically their condo fees are based on the square footage, and their ownership. Everything is kind of laid out in the condo docs and the architect is going to be the person that is going to come in and make sure that all the details of this building are specifically laid out, and then transfer all that to the attorney, which is the next person you would probably want to speak to. The attorney is going to talk to you a little bit about the process of drafting up condo docs, splitting your units into three separate entities, or three separate deeds.
There's a lot of legals that go into taking one deed, one multifamily, and now dividing it up into three separate living quarters. The attorney is the next person you would want to speak to. You want to make sure that you are on board and fully understanding everything that legally needs to be done to convert these into condos, get your new condo docs, and everything else that goes along with it.
The last person you want to speak to, very important, as well, is your CPA, whoever does your taxes. You really want to make sure that they are versed in the real estate world. You want to make sure that they fully understand capital gains tax. What are my tax consequences for selling this building. Are they any different from selling it ... your cost basis is going to be adjusted. Your cost basis is going to be adjusted from depending on how much money you put in, what your renovation budget is. Your renovation budget is going to affect your cost basis. You really want to ask them a lot of questions, your CPA a lot of question about the tax consequences that come with selling property and then your opportunity to sell these three or four condos, two, three condos, as well.
Again, talk to your real estate agent. Ask a lot of questions. Does it make financial sense? Talk to your attorney. What are the legal ramifications? Talk to your CPA. What are the tax ramifications? Talk to your general contractor. What is this going to cost me to get this to a market-ready condo? Last, but not least, talk to your architect about getting your floor plans ready so you can actually present them to your attorney to be included in the condo docs and, again, your realtor would probably want to see those floor plans, as well, because they would actually help the sale of the potential building, as well.
Again, Willie Mandrell, Mandrell Company. Five people that you want to speak to before you consider, or while you're considering, changing your multifamily into a condo. If I can be of any help, please reach out. Mandrellco.com, m-a-n-d-r-e-l-l-c-o.com, or you can reach us at 617-297-8641. Thanks and have a nice day.
Hi All, I Just want to go over briefly four things that you can do when you're selling your multi-family. Your two, your three, your four unit, your residential multi-family property. Four things that you can do to make sure that you maximize the price. That you get the most. When putting that property on the market, you walk away with the most money that you possibly can as a potential seller.
Four things that you can potentially do. Let's start with number one. You can provide a unit vacant. Why would it be beneficial to you as a seller to provide a unit vacant when selling your multi-family? You have two potential buyers when you're selling, let's say a three family property. You have the owner-occupant buyer. Someone who's going to purchase the property, move into the property, move into one of the units and rent out the other two to supplement their income. Then you have the investor. An owner-occupant buyer is almost always going to pay more for the property, their primary residence, the place that they're going to live, than a potential investor.
Investor's going to come in and they're going to analyze the numbers specifically and strictly and say, "Does this property make sense from a financial standpoint and if it does or it doesn't, I'm going to make my decision based on that." An owner-occupant buyer is going to move in and make it their own. It's the place that they live. There's an emotional attachment to that place. By you providing a unit vacant, you're essentially allowing them to move in. Without a unit vacant, essentially if all three units are occupied, only an investor can buy that property from you. Basically, you're eliminating the owner-occupant opportunity if all three units are tenant occupied and there's not a space for an owner-occupant.
The first thing I would say is I wouldn't go out and necessarily kick a tenant out, but if there's a tenant moving out and you're considering selling somewhere around that same time, you know you have a lease expiring in three or four months, it may be a good time to say let's put the property on the market while I have this potential vacancy and move in at that time.
Number two. Make obvious repairs. If there are some things that need to be done, you are going to maximize your selling price by making sure that the property is shown in it's best light. That seems obvious to some people but many people don't do it prior to selling. Making sure that any appliances that are broken, light fixtures, front door, back door, the front porch, back decks, making sure that those things that are quite obvious as soon as you walk up to the building or as soon as you walk inside a unit, this is clearly not the way it should be. Making sure that those things are done prior to putting your house on the market or prior to putting that property on the market is going to maximize your sale.
Prepare for a spring or summer sale. If you are, let's say it's January 2017 and you are moving into, considering selling, you have about three or four months before that spring market hits, that April, May, you really want to prepare your property for that spring marker or that summer market coming up. The reason you want to ideally sell in the spring or the summer, you have a larger pool of buyers at that particular time. Investors are going to be around all year round. But your owner-occupant buyers, if they're renting an apartment right now and considering buying, their leases typically end sometime during the summer months. You're going to have a much larger pool of buyers. People typically like to move during the summer when things are easier and not moving in the snow, especially in a place like New England. Preparing yourself mentally, getting your documentation ready, let your tenants know about the sale, and making sure that you're getting those things done during the winter months so when the spring and summer roll around that your house or your property is prepared for that sale.
Last but not least, overpricing your property. Don't overprice your property. Price it, I would say accordingly. Talk to your realtor, pull comparable sales, what's going on in the neighborhood, what makes sense for this particular property compared to other sales. When you overprice the property, what you'll end up with is potentially a stale listing. A stale listing is something that's been sitting out there for 60, 90 days and now it's not getting as much attention as it should be. When you do that you actually tend to get a lower sales price then you would have if you just priced the property appropriately from the beginning and sold it as quickly as possible to the best buyers during this spring or summer market.
Again, providing a unit vacant you're going to get more money from an owner-occupant than you are from a potential investor. Making the obvious repairs. Making sure that your property is presentable and showing in the best light. Preparing for that spring or summer sale and not overpricing your property. Making sure that your property comes on the market at a reasonable and fair price compared to other similar properties that are selling on the market. If you do these four things, you'll be sure that your sales price is maximized and you'll get the most money and put the most money in your pocket after the property is sold.