Let’s Talk Real Estate – June 2017
I just left the title company where our clients picked up a $61,000 check—the proceeds from selling their house. What makes this such a great story is how young and financially smart this couple has been. I first met this twenty-something couple, two and a half years ago when the husband was transferred here by the Army; she was pregnant and they came to us looking for a rental home. They settled into a rental home in Eagle Point for $1250 month, and after renting for six months, called us to help them buy a home. They soon found the perfect home for $167,900 and moved in. Because he was in the Army, he was able to get a VA loan with zero down, giving them a mortgage under $800 a month—$450 a month less than they were paying in rent. In addition, they had a $9,000 a year tax deduction by writing off the mortgage interest portion of their payments, and in two years time, walked away with a $61,000 check. “Accidental Investors” or really smart young couple…you decide?!
One of our brokers is 25, married, and bought his first home at 23, which in two years is now worth $65,000 more than what he paid for it. He’s a great example of either a financial wizard or Accidental Investor and he now gets to help his peers follow his path. A client called him after a year of owning their home and wanted to sell it to move “out to the country.” He had to deliver both bad and good news to them. The bad news: if they sold their home without owning it at least two years, they would have to pay state and federal capital gains tax on any equity they’d earned. The good news: they had made $40,000 in equity in just one year and if they wanted to move at the end of this year, they’d most likely have $80,000 in equity. What’s also interesting about this couple is their parents weren’t always supportive of them buying a home and they thought they should wait and save more money first. If they had waited to purchase a home, any savings would have been wiped out by the $40,000 cost increase of their home.
Our young broker had another couple that came to him to see if they could buy a home with the goal of paying less for a mortgage payment than their rent payment. They were successful, and in addition to lowering their monthly payment, they have made at least $25,000 in equity. And if that’s not enough, their lot is so large they are now working with a private planner to split it in half and sell off the vacant portion for $70,000.
Many of these cases are about young couples who are “just married” and making smart financial choices. They all have mortgage payments that are lower than their previous rent payments! They all save on their taxes by deducting their mortgage payments, and lastly, they are all making about $30,000 a year in appreciation.
Accidental Investors or financial wizards, these are all smart couples who have made sound financial decisions. We hope other young couples reading this article think twice about continuing to rent and also become Accidental Investors!