Donation from Each Transaction to National Fallen Firefighters Foundation

This post is not really about buying or selling real estate. This is an announcement of the philanthropic commitment I am making through my business to support a cause that is near and dear to me, my family, and my friends.

As the son, grandson, nephew, cousin, and good friend of many firefighters, I have witnessed first hand the dedication and sacrifice these men and women make on a daily basis. While everyone else runs away from danger, these individuals constantly put their lives on the line to protect people, their pets, and their property. Firefighters are the epitome of selflessness, day in and day out putting their lives on line for their community. All the while, every firefighter you meet will tell you they have the greatest job in the world.

Unfortunately, even though they all feel it is a great job it comes with a huge amount of risk. When one of these brave individuals goes down in the line of duty, it often leaves their families in a difficult place, both emotionally and financially. This is why I have decided to dedicate a portion of my business to giving to an organization that gives back to families who have been struck by these unfortunate events.

I have decided to donate $250 of each transaction I am part (closings and referrals alike) to the National Fallen Firefighters Foundation. Their mission statement is as follows:

"OUR MISSION IS TO HONOR AND REMEMBER AMERICA'S FALLEN FIRE HEROES, TO PROVIDE RESOURCES TO ASSIST THEIR SURVIVORS IN REBUILDING THEIR LIVES, AND WORK WITHIN THE FIRE SERVICE COMMUNITY TO REDUCE FIREFIGHTER DEATHS AND INJURIES."

If you would like more information about this organization, please visit their website.

If you feel this is a worthy cause and would like to help me achieve my goal of donating $10,000 to this organization this year, please pass this along to your friends and family. Remember, this is for both closings and referrals, meaning they don't have to be local to my area, as working with Keller Williams, I can refer out to great agents all over the world!

Making a Strong Offer

In today's real estate market, we often find ourselves in situations where homes are coming on the market one day and having multiple offers the next. It is extremely stressful for buyers who need to move in a certain period of time and sometimes buyers think the solution to the problem is to raise the price of their offer. This can create other issues (i.e. appraisal problems), and often times there are other aspects of the offer that sellers will look at when making a decision. Here we will take a look at some of the things sellers will look at when determining the strength of an offer.

Cash Vs Financing

This first one is pretty intuitive, but I figured I would mention it anyway. A cash offer will always entice a buyer more than any financed offer. There is not a third party who needs to approve the purchase. Cash buyers do not require bank approval, which will also include appraisals, inspections, and underwriting. Any of these can cause a deal to fall apart.

Pre-qualification Vs Pre-approval

It is highly recommended that any offer be submitted with some sort documentation proving that you can pay for your purchase. In the case of a financed offer, this would be either a pre-qualification or pre-approval from a bank. Having a pre-approval to accompany your offer is stronger than a pre-qualification. A pre-approval has already gone through preliminary underwriting and the bank has already examined your financial documents as opposed to just taking your word for it.

Also, who your documentation comes from is equally important. A local bank who local market experts have worked with in the past will carry more weight than one from a national bank. The larger banks are notorious for being difficult to get in touch with during the lending process and not closing on time. Agents know this and advise their clients to these issues.

Pre-qualifications and pre-approvals are not binding. The lender may not like it, but you can choose to use a different lender for the actual purchase. Shopping around for the best rate or a lender that works for you is always in your best interest.

Financing Type

The type of financing also comes into play with the strength of your offer. Conventional loans are typically the favored type of financing. These are usually your stronger buyers who are more likely to close. The other drawback of FHA and VA financing is that they have additional inspections and appraisals that can sometimes delay or halt a deal.

Contingencies

When your offer contains a contingency for another event to occur in order for your purchase to go through, this makes it less attractive to the seller. The most common is a financing contingency, which everyone will have unless you pay cash. Another common contingency is the sale of your existing home. This gives first time buyers and investors an advantage over those who currently have a home that needs to be sold. If you do have a home that needs to be sold, talk to your lender and see if it is possible to qualify without that contingency. It may be a stretch to carry financing and make payments on multiple properties, but it may be worth it for a short period if it means getting your dream home.

Timing

Most buyers think that the seller will want to close as fast as possible, however this is not always the case. Sometimes sellers want to delay a closing in order to line up with their next home purchase or maybe even the end of school for their children. If you are flexible as a buyer, it is important that you have your agent contact the listing agent to see if there is a preferred closing for the seller.

So, as you can see, the final purchase price, while important to a seller, may not be the most important aspect of the purchase. Always be sure to align yourself with a Realtor® who can negotiate on your behalf and give you the best chance of creating a win-win situation for you and the other side of the transaction, whether you are a buyer or seller.

If you have any questions about buying, selling, or investing, I am always available to help. Don't hesitate to contact me!

Rising Interest Rates and What They Do to Your Budget

This is an analysis that I did for one of my clients who are looking to build. I wanted to help them understand the possible outcome of building and not having final financing in place for another 12-15 months from now, and what it would mean for their budget and monthly mortgage payment. I felt it was prudent to share this, as it applies not only to those who are thinking of building, but also those who are thinking of waiting to purchase.

While we can't predict what will happen with rates, what you can afford now may decrease in the future if rates go up, as they are predicted to. Even though inventory is low and prices are up, the current interest rate environment makes it advantageous to either purchase your first home, move up to something larger to fit your families needs, or even to downsize if your nest is now empty.

If you have questions on whether or not you can qualify for a mortgage, or what you can qualify for, I have a few great lending partners that I can direct you to who would be more than happy to go over your individual situation and see what can work for you.

"If you consider a total budget for lot purchase and building of approximately $600,000 and look out to 12-15 months when the project would be completed, from what we have talked about, this seems like what you were looking at for a total budget.

For arguments sake, if we make a comparison of where rates are now and where they could potentially be and consider a current rate of 4.25% and a future rate of 5.5%.

At a total price of $600,000, if you consider 20% down payment, we would be looking at $120,000 down and $480,000 in mortgage balance 12-15 months from now. At an interest rate of 5.5%, this would result in a monthly mortgage payment of $2,725.39 per month.  On top of this would be the closing costs associated with the land purchase, costs of the construction loan, and costs of refinancing once the project is complete. Also, you would have a year's worth of rent payments, which would probably be somewhere between $1,500-2,500 (rental inventory is tight right now as well, there is only one rental available in clover schools and eight available in Fort Mill). 

If we look at a purchase price of $700,000 at today's rates of 4.25% at the same 20% down, which would be $140,000 down and $560,000 in mortgage balance. This results in a monthly mortgage payment of $2,754.86 per month. So it would be about $30 a month more, and $20,000 more down payment, but it would save $18,000-30,000 in rent payments as well as the cost of financing of the construction loan and all the additional closing costs. And spare you from having to pick up and move an additional time.

Obviously we can't predict where rates are going to be a year from now, but just something to consider when making your decision. I thought it was a very intriguing discussion and definitely thought the information was worth passing on to you guys. It really comes down to what you would qualify for and, beyond that, what you are comfortable with having for a monthly payment (you certainly don't need to stretch your budget if you don't want to)."

Southwest Charlotte Rental Analysis

My real estate career began with investing in buy and hold rental properties. To me, the monthly income that is produced by having a rental property is a great way to get into real estate without having to invest a great deal of time, and possibly without having to invest a great deal of money as well.

Recently I looked at four zip codes in Southwest Charlotte to see where investors were spending money, how much they were spending, and estimated what kind of returns they were seeing. There is so much data available through the Multiple Listing Service, and I felt sifting and sorting through this data would be important for me to understand our local market, both for myself and my clients. THIS DATA IS ALL ACTUAL CLOSED INFORMATION FROM THE MULTIPLE LISTING SERVICE.

Assumptions

In order to have a fair basis to compare, I normalized purchases that were financed to approximately what interest rates are now even though the rates that individual purchasers were probably different. I needed a way to look at everything on a level surface and that seemed like the most reasonable way to do it. I find that investment mortgages typically run 75 to 100 basis points (0.75% to 1%) higher than personal home loans. With 25% down, you would receive a better rate than with 20% down.

In future posts I will tell what terms I used as well, but for this initial one I used an interest rate of 5% and based the mortgage on a down payment of 25%. Currently, first home loans are running about 4.25%, so adding the 75 basis points, we get to right at 5%.

Other assumptions I made were what insurance would cost. Silmilar to interest rates, these rates will vary from person to person and property to property, but I included my normal figures to provide a starting point.

These calculations do not include vacancy, maintenance, and property management, but also do not include future appreciation or rent increases.

Actuals

I have used actual amounts for property taxes and HOA fees. These items are included in the listings so I could use the actual numbers.

Results

Here is a summary of what has sold in each of the four zip codes I examined. 28273, which has been a hot rental market for some time now, appears to still be a great place for investors looking for monthly cash flow on their investments.

 

I do have a spreadsheet with additional breakdown of each individual property for these zip codes, but posting an image if it would not do justice since it would be impossible to read. If you are curious to see the data, please don't hesitate to email me, tom.oneil@kw.com, and I will certainly pass it along. Also, if you have other Zip codes that I could provide a similar analysis on, please let me know.