Since 2012 there has been significant home price appreciation in many U.S. metropolitan areas. Some markets reached levels of unaffordability and continued on a tear until recently. Markets such as San Francisco, New York City and parts of Miami have reached unprecedented highs, accompanied with worries about social clustering, lack of affordability, and the need for long commutes for “regular” (most) people.
In the markets we are interested in and are investing in, there are more diverse scenarios. In the Phoenix and Las Vegas metropolitan areas, prices have indeed gone up quite a bit since 2012 (Phoenix over 100% and Las Vegas almost 100%). In these two metropolitan areas, affordability is still not an issue. Prices started going up from an exaggerated low point that was the knee-jerk reaction to the Big Crash. Even at today’s prices in Phoenix and Las Vegas, affordability is still not an issue. Most buyers are homeowners and they can use the amazing FHA loan with a 3.5% down payment and the lowest possible interest rate, which makes them less price sensitive.
For investors, Phoenix and Las Vegas are less interesting to buy in at this time, as rents have not moved up very much while prices essentially doubled since 2012. Cash flows are nowhere to be found (and investors can’t use the special FHA loan).
The Texas markets have started their ascent around 2013. In the major metro areas in Texas, prices went up significantly (around 40% in many cases). This is not as extreme as in Phoenix but enough to make investing in the major TX markets less attractive, especially with the high property tax in the state of Texas.
Florida is a bit of a mixed bag. Expensive properties in Miami Beach are through the roof. Parts of Orlando are up about 50%. However, areas in the larger metro area may still be appealing for investment, such as Winter Haven and perhaps Deltona. Tampa is up about 40% but further areas like Zephyrhills are only starting to roar.
In Jacksonville, there has been some price appreciation but in the areas, we primarily look at, prices are still attractive. Partly this is due to foreclosed homes still hitting the market in an AS-IS condition, pulling comparable sales down. The foreclosed properties showing up in the market is an All-Florida phenomenon, as Florida is a judicial foreclosure state and well-defended foreclosures can last many years.
Oklahoma City has been relatively stable with so-far modest price appreciation. It is close to Dallas and the prices are much more affordable, rents are similar, and property taxes are 40% as much! It is a market that is appropriate for investing in at this time. The large oil reserves in the South Central Oklahoma Oil Province (SCOOP) area, which is not far from Oklahoma City, may bode well for future economic upturn (despite the city already being a strong economic market).
While the most expensive metro area prices are beginning to sag somewhat, investors interested in the range of $100K-$200K can still find appropriate places to buy. Couple that with the still super-low interest rates (get 30-year fixed rate loans – inflation starts eroding them from day 1 so the latter years are almost meaningless in terms of the real buying power of the dollar), and you get an excellent combination for the savvy long term real estate investor in the right markets.
Feel free to contact us to discuss. I delight in talking about these subjects. email@example.com
We will discuss in further detail, including having market teams talk about these and other issues, as well as expert speakers on important investment subjects, during our ICG 1-Day Expo on Saturday, December 3rd. Everyone mentioning this blog can attend for free (email us at firstname.lastname@example.org). These events have been very useful to the attendees, and I learn a lot every time as well. The event is near the San Francisco Airport and starts at 10:00 AM so people can fly in from Los Angeles, San Diego, Seattle, and Portland and so on.
Looking forward to seeing you!
The 30-year fixed-rate loan does not usually get its due as an amazing financial tool that should be utilized by any savvy investor who can get it. For many foreigners, it’s incomprehensible that in the U.S. we can get a loan that will never keep up with the cost of living for 30 years. During that period, essentially everything else DOES keep up with the cost of living, including rents. Only the mortgage payment and balance (which also gets chipped down by amortization) do not keep up with inflation.
You can talk to many borrowers who have taken 30-year fixed-rate loans and after, say, 16 years, realized that although there are 14 years remaining to pay off the loan, the loan balance AND the payment seem very low relative to the marketplace rents and prices. The remaining 14 years is almost meaningless since in many cases (statistically and historically) the loan balance will be a small fraction of the home price and not very “meaningful.” Just to get some perspective, most other countries on earth have loans that constantly adjust based on inflation. Both the payment and the balance track inflation all the time, usually with no yearly and lifetime caps as adjustable loans have in the U.S.
The power and positive effect on one’s financial future get magnified when you consider that in 2016 we are still in a period in which interest rates are very low. While investors cannot get the same favorable loans as homeowners, it is nevertheless quite common nowadays to see investors getting a rate of between 4.25% and 4.75% on Single Family Homes (SFHs) investment properties.
From a historical perspective, these are extremely low rates. Most experts think that in the future, mortgage rates will rise; from a historical perspective, even 7% is considered a low rate. Thus, these days, you can “turbo boost” the great power of the never-changing-30-year fixed-rate loan by also locking in these amazing rates which will never change. If in the following year’s interest rates indeed go up, you will feel quite good about having locked under-5% rates forever.
Once you secure your fixed-rate loans, two inexorable forces start operating incessantly: inflation erodes your loan (both the payment and the remaining balance), and the tenant occupying your SFH pays rent which goes in part towards paying down the loan principal every month. These two forces create a powerful financial future for you.
Many investors think that if a 30-year fixed-rate loan is good, then a 15-year loan must be better. I actually beg to differ. You can always pay a 30-year loan in 15 years (or 14 or 20 or 10 or 8) if you wish – just add some extra to the principal payment. However, you cannot pay a 15-year loan off in 30-years. Thus the 15-year loan FORCES you to make the higher payment while the 30-year loan gives you the important flexibility of keeping your payments low OR making them high based on your financial situation and other considerations.
Some would say that the 15-year loan is also better since it has a better rate. True, the 15-year rate maybe 0.25% or even 0.5% better than the 30-year rate. However, in my opinion, this is not enough to justify the enormous loss in flexibility. In addition, having the loan for a longer time allows inflation to “erode” the loan even further. This last consideration greatly minimizes the argument some investors make that “…with a 30-year loan I pay hundreds of thousands of dollars more over the life of the loan.”
One factor missing here is that they neglect the TIME VALUE OF MONEY! These extra dollars paid in year 20, 22, 28, etc., are in fact extremely “cheap” dollars in the sense that their buying power is greatly lowered over time. If the value of these future dollars were to be calculated based on the PRESENT buying power of the dollar, some of the later payments may be worth mere pennies on the dollar.
In summary, I recommend getting a 30-year loan and then choose how long to take to pay it (anywhere between zero and thirty years – you choose!).
While interest rates are low, it would behoove the smart investor to buy SFHs and get 30-year fixed-rate loans on them while this “window” is open. Investors can finance up to 10 residential properties using conventional 30-year fixed-rate loans (if their credit permits). With some maneuvering, married couples may be able to stretch it to 20. If you are under that 10 (or 20, as the case may be) property barrier, it would be quite a smart move to buy SFHs and utilize the incredible loans you can get. You may wish to pay the loan off in 16 years to pay for your kid’s college education (SFHs are effective at this – especially if they don’t go through a crazy 10-year cycle as we had from 2004-2014). You could aim for the properties to be paid off at your retirement date (or the savvier move is just realizing how low they have become and let inflation keep eroding them as equity grows into your retirement years, providing financial growth well into the future in the face of ever-increasing lifespans, and the need for our finances to keep up with our life expectancy).
Thirty-year fixed-rate loans are available on 1-4 residential units, which mostly means Single Family Homes – the ideal investment for most individual real estate investors, as we have covered in a previous blog.
We will discuss this topic, as well as many other crucial topics for investors, at our Quarterly 1-Day Expo on Saturday, May 21st near SFO. We will have market teams present, including a new exciting market… We have also invited top-notch experts to lecture. We will have experts on Property Management, 1031 Exchanges and Proper Insurance – the first and most important barrier in protecting your assets, including nationwide umbrellas.
Everyone mentioning this blog is invited to attend for free, with associates. Just email us at email@example.com to register, and in the subject line write, ‘Read your blog!’ Then give us your contact information. We will respond with a confirmation for your free entry. AND that is all. We hate spam as much as you do. See you there.
Many of you may automatically assume that you will get no college aid when your kids arrive at that age, due to your income, which you assume is too high (especially if you are in Silicon Valley) and crosses all the threshold.
Surprisingly, it is not a matter of just how high your raw income is. It is a much more complex matter of how your overall financing looks, is arranged, even optimized.
For this important knowledge, we have invited Gary Sipos, MBA, AIF, to educate us (no pun intended) on the subject. Gary has helped numerous families get into college in ways that were much more beneficial and frugal than they had imagined.
I always talk about real estate investments, the way we do it at ICG, as a means for a stable financial future with two main items: retirements and your kids’ college. I like to explain how Single Family Home investments are done with a long horizon that can assist both these goals in a very powerful way.
It is only natural that if we can optimize one of our biggest potential expenses, we would like to know about it.
Gary will be speaking THIS SATURDAY, March 5th, at our ICG 1-Day Expo near SFO. There will also be experts on financial planning, special lenders and loan programs, and market teams from choice U.S. markets for us to meet, learn from, and be exposed to some great properties.
Anyone mentioning this blog can attend for free (with guests who can come for free as well). Just email us at firstname.lastname@example.org to register. See you this Saturday.
There are lenders seizing an opportunity by operating outside of the restrictive FNMA guidelines. In the past year, we have seen loans improving for foreigners. It started with 50% LTV (loan-to-value) loans and now loans are up to 65% LTV for foreigners. The minimum loan amount is $100,000. Interest rates are not far off from the excellent rates American investors can get – mostly in the five percentile. Sometimes with a long fixed-rate period, perhaps just passing the six percentile.
Loans can be fixed for 5, 7 or 10 years (the latter ones touch a bit over 6% but the two former ones are well within 5%+). Americans can now also get 65% LTV loans with similar terms for properties between 10 and 20 (!). As we know, FNMA caps the number at 10, a restrictive barrier not enabling markets to fully engage investors. Will Bill Gates also be limited at 10 residential loans? Apparently yes, according to the FNMA guidelines.
In any case, having the ability to borrow at 65% LTV can enable a good contingent of veteran experienced investors, to continue investing and take advantage of the great rates prevailing in today’s markets. As someone who has seen rates be well in the teens, I can appreciate what it means to borrow on property number 16 at a rate that is a bit above 5%.
I am impressed with these advances. As a result, I have invited the lender to speak at our quarterly ICG 1-Day Expo on Saturday, May 30th. There will also be solid conventional lenders and loans featured prominently at the event.
In addition, there will be experts to teach us critical issues for investors: Scott Gerlis Founder and CEO of SAG Credit Consultants will speak about credit repair and enhancement and how to maximize everyone’s credit and avoid the pitfalls. Lucian Ioja, Financial Designer with Integrity Wealth Management, a respected financial planner, will teach us the overall way to look at arranging and optimizing our finances, not just via real estate, to secure a powerful retirement and other goal accomplishment. Joyce Feldman, Founder, and CEO of Joyce Feldman Insurance Company (Farmers Insurance) will teach us about how to use insurance correctly as the first and possibly the most important line in protecting our assets, common mistakes and how to avoid them, and a comprehensive look at our protection.
Needless to say, teams from the best markets in the United States will be there to update us on their marketplace, interact with us, and tell us about special deals in their markets. We have been holding these events for about 25 years now and I keep learning a lot during each and every event. Mention this blog post and you can attend free – just email us at email@example.com or call 415-927-7504.
Between the experts, we brought in to speak in December to those that joined us for the 1-day expo we had on Saturday, March 7, 2015, attendees are feeling the momentum of this year being a record-breaker for real estate investment. In March we had fantastic speakers. We heard from Tom Anderson, one of the best-known experts on the subject of real estate investing via your IRA account. He taught us about what works and what doesn’t. There are many types of real estate we can purchase via our IRA accounts and the advantages were something you will want to learn more about if you were not there. We are considering asking Tom and our other speakers to guest blog for us, so look for that.
In concert with Tom, we had invited Roger St. Pierre to tell us about getting loans for buying real estate via our IRA accounts. Roger taught us about special NON-RECOURSE loans and how they can enable us to infuse “safe leverage” into our IRA investing. Wow. Tom, like all of our speakers, are always great at really spending the time and energy in what they deliver to educate.
Attorney Brett Lytle gave a spectacular lecture that had everyone at the edge of their seats about asset protection. Brett covered fine points and state-specific details which were of crucial importance to the attendees. Since the first wall of asset protection is good insurance, we are inviting Joyce Feldman, who has great experience insuring real estate investors, to our NEXT 1-Day Expo on Saturday, May 30th. We have various experts under consideration who will be joining Joy.
Getting updates from the market teams was fantastic as always. Things change consistently, and to have them there every quarter to let people know what is going on is critical. I have been producing this event for over 20 years now and I still learn every time.
We had lenders discuss the ever-changing new loan programs for investors. Since loan conditions are rapidly changing these days (getting better), including loans to foreigners, we will have expert lenders at the May 30th expo as well. Just the Q&A sessions and the audience engagement were in themselves incredibly instructive. What a great day!
Looking forward to seeing you on Saturday, May 30th. To register please email us at firstname.lastname@example.org or call at 415-927-7504. Mention this blog and you can attend for free AND have your guests attend free as well.
Many investors have almost given up on getting loans to buy investment real estate. It may be that their credit was ruined during the recession. It may be that they own over 10 properties and exceed the FNMA guidelines. Or, it may be that their income is not sufficient or their loan to income ratio doesn’t work.
Nowadays, securing a loan from a lender is far more difficult and a lot of very good people get left out in the cold. However, there are alternatives. One such alternative is the Asset-based loan. This is a loan based on your stock portfolio (as a bonus your foreign friends can also get a loan against THEIR stock portfolio in 30 different stock markets worldwide).
At our ICG 1-Day Expo this Saturday, one of our expert speakers will be Mark McKay, who specializes in Asset-based loans.
Take a look at the descriptions of these loans by Mark:
Still the best and easiest way to finance your real estate investments.
Loan is leveraged against your stock/securities portfolio
Lowest interest rates in the nation
Not a margin loan and generally several percentage points lower than margin loans
Not credit score driven
No limit on number of properties owned
You maintain ownership of your stock/securities portfolio
You continue to receive all the dividends
Fast and easy processing – generally 2 or 3 weeks
So low doc almost NO DOC
Established as a line of credit, you only pay interest on what you use
Come hear Mark THIS SATURDAY near the San Francisco Airport (details at www.icgre.com/events). Send us an email at email@example.com mention this blog and you and a guest can attend FREE.
ICG uses single-family home investments, bought in advantageous locations and the best U.S. markets. We enable you to enjoy the clout that comes from purchasing a multitude of houses, even if you only buy one.
165 N. Redwood Dr. Suite #150 San Rafael, CA, 94903