Costs to Plan for When Buying a Home

When buying a home, your focus may purely be on the down payment, but there are other costs associated with buying your home. Learn more about what costs to plan for, what can be avoided and what is not optional.

#1 Closing Costs

According to Zillow.com “home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs.”[1] Closing costs vary from transaction to transaction but include a fee from the mortgage broker and lender, fess from any local and state taxes, and fees for a lawyer to oversee the transaction.

 

#2 Moving Costs

Moving can get expensive! It’s not just your stuff you have to worry about. If you are currently renting, are there any repairs you need to make to get your security deposit back? If you are selling your current home, do you need to make any repairs to get it in sellable condition?

#3 Home Repairs + Personalization

Even if you are buying a brand new, move-in-ready home, there will most likely be some repairs and personalization you will want to do. Picking the perfect paint colors and furnishings is one of the best parts of owning your own home. Make sure to leave some room in the budget to make your new house your perfect home.

#4 HOA fees

The worst thing about HOA fees is they aren’t a one-time fee. While some HOAs will have move-in fees and other upfront deposits, most are a flat monthly payment. When calculating what homes you can afford, make sure you include the HOA fee in your monthly expenses.

#5 Home Inspection + Survey Costs

No matter how expensive a home inspection and survey may feel, they are 100% worth it. Knowing where your property lines are and if there are any costly potential issues with your home will pay off in the long run. Even if a home appears to be in perfect condition, home inspectors are trained to look for underlying issues.

Though buying a home can be costly, most homeowners feel that the pride of ownership is worth every penny. As long as you carefully plan for costs and stay within your budget, purchasing a home will be a fulfilling and pleasant experience.

[1] https://www.zillow.com/mortgage-learning/closing-costs/

How to Fix Your Credit Score

Having good credit is an important part of investing in real estate. With good credit you can get financing easier and you can also get better interest rates. Now, if you have a poor credit score here are some steps you can take to improve your credit.

  • Pay all your bills on time. This is a no-brainer, but make sure all your bills are paid on time, even if it is the minimum payments.
  • Don’t open too many new accounts at once. One thing that credit agencies look at is the age of your accounts. By opening several new accounts at once, the average age of your accounts will be reduced.
  • Do not cancel any unused cards. Another aspect of credit is the amount of credit you have used compared to the amount of credit you have available. The lower the percentage used, the better. Ideally you want to keep the ratio of credit used to credit available below 30%.
  • Keep your credit balances low. This ties in with number 3 in that you should not max out your credit. Keeping your credit balances low will help keep your credit score high.
  • Have a variety of different credit types. Paying on a car loan, a credit card, and a mortgage will show you are able to juggle and maintain payments on different credit types.
  • Debts in collections needs to be paid off. If you have any accounts in collections they will need to be paid off. Until they are paid off, your credit will suffer.
  • Get a personal loan to pay off credit cards. This can be a very effective way to lower your interest rates and pay off your debt faster.

In real estate investing having good credit will increase your opportunities to invest. As mentioned, it will save you money, give you better interest rates and help you qualify for better loans. Keep these 7 tips in mind, as they are great ways to maintain and improve your credit score.

Bear Market Looming

Growing up as a kid, no matter how bad it got, there was always the giddy feeling in the back of my mind around Christmas. Christmas endears presents, family, and time off from work or school and all that entails. I feel the same way about bear markets. Once the trend reverses, stocks and markets move fast. As an option trader, I see potential, opportunities, and lots of volatility. Put contracts are the method of operation and best choice for bearish markets. The put contract has a natural advantage over its call cousin, and that is in addition to deltas and gammas working for you. Puts also have Vega’s working alongside the other two. That is because as markets fall, volatility rises, and Vega is the measurement of how the option price increases as volatility rises. Options generally prefer faster movement of the underlying due to time decay. Since markets tend to fall faster than markets rise, this provides ideal conditions for put. Fast moves, increasing option prices, and leverage all point to the put contract.

Dow Theory suggested markets move in cycles. Cycles last 4 to 7 years on average. With 2016 being at the markets 7 year high, the Bear market is overdue. Now I don’t suggest we run around like Chicken Little saying the “sky is falling.” However, if we are prepared, we shall not fear, and maybe even profit from it. Draw your lower trend lines, your support levels, check your moving average cross overs, and then when the market changes, change with it and buy some puts.

Confidence Gains Gains

The year was 1984, and I was living in Southern California. I loved to ride my skateboard everywhere I went. That summer I spent most of my time at the bottom of pools and half-pipes, riding what I could, not daring venturing to the top, for it was too high and I had too much fear.

In skateboarding, dropping-in is the method of standing on the tail of the skateboard, hanging over the edge of the empty pool or half-pipe and then stepping on the front of the board so you drop yourself over the edge. I remember spending most of that summer staring over the edge, never actually dropping-in and never realizing the benefits that come from dropping-in because I was too afraid to do it. I always walked down into the bottom of the pool and had to pump myself up, requiring more work and less reward. I finally did drop in at the end of that summer, with an uneventful fall. But I got up and did it again. I could probably do it even to this day because the fear is gone and the confidence remains.

As a new trader, I learned the rules of proper trading. As I became better and gained experience, my trades did too. However, what I learned did not always translate into trading profits.  Knowing and doing are two separate things. Confidence in your trades can really translate into more profits. Act on your beliefs! Trying and failing is far less painful than not acting and missing the trades due to fear and lack of action. Confidence is said to breed more confidence. Have faith, trade your rules, and drop-in when the trades present themselves. Life is better when you take a chance, a well-planned and practiced chance, where odds are calculated. Never-the-less, “act or not to act” is the question and the answer.

Planning your Trade

Summers are full of family vacations. Picture a large family cruising down the highway traveling to a distant destination. This doesn’t just happen; meaning, we don’t just leave the house, pile into the van and take off. My wife and I make a plan. We plan for us and for our kids. We plan what we will eat, drink, and even what clothes we will bring, depending on weather conditions. Even after all the planning, things come up that we don’t account for. Like family trips, our trades should have a plan.

In trading, there will always be some unknowns. Will the underlying stock go up, go down, or remain the same? Depending on our bias, we place trades that should pay-off, if our assumptions hold true. But what if the stock only goes up half of our intended move, or not at all? What if it goes opposite of our intended direction? Planning ahead allows us to prepare for these outcomes and prepare for the decisions we will face because of them. Making decisions when powerful emotions like fear and greed are involved are often not based on sound thinking. But, if we have a plan for each outcome, we can decide in advance what we should do. We can account for such possibilities when we are calm and execute the proper orders when we see them, rather than in the spur of the moment when we may not be thinking clearly. Trading can be an adventure, but it doesn’t have to be a stressful one. We can reduce anxiety if we will plan ahead of time and make decisions in advance, helping us be in control no matter the outcome.

Suggestions for First Time Flippers

Buying real estate properties for a bargain, fixing them up and then reselling them for a profit is a great way to make money as a real estate investor. This is often referred to as “house-flipping” or doing a fix-and-flip.  You look for a home, buy it cheap, fix the home up, then sell it for more than what it cost you to buy and fix it up.  You can make a huge profit doing this, and there are a few ways to improve the experience or ensure you do not lose money.

Plenty of real estate savvy investors are making money with fix-and-flips but while it looks and sounds easy to do, house flipping has some risks involved. If there are more repairs than estimated, the flipped property does not sell immediately and/or you encounter other unexpected issues, an investor might not break-even.

Here are several suggestions to help you be successful:

  • Get a Mentor:

Successful “flippers” educate themselves and know the ins-and-outs of the real estate market. If you are just getting started, one helpful thing to do is to find a successful house flipper to mentor you. The things these seasoned investors have experienced or learned along the way are invaluable. Offer a percentage of your profit for advice if you need to. Then do your research on properties in your local area and find a house you would like make an offer on. 

  • Save Money On Materials:

Buy the materials to fix up your house yourself.  Contractors do supply materials but they will mark up the price of the material. If you buy the materials yourself, you will save money and pay them for labor only. 

Although costs for materials vary, it’s best to get to know your local stores. Some stores who offer discounts to contractors will give you the same deal if they know you are an investor and plan to do more than one house. Don’t be afraid to ask for a discount. Home Depot, Lowe’s and Costco offer great deals. Also, watch for any clearance sales on materials. You can also go to second hand stores to find great deals at a lesser price than buying new materials.

  • Save Money On Labor

Some investors buy a house during off-season. This way they can complete the job on time since their contractors have less of a workload on their hands and can focus more on the job. Contractors are sometimes cheaper in the off-seasons as well.

Hire reputable subcontractors, instead of a contractor, and run the job yourself. This can save you money because a contractor also marks up the price of the subcontractor.  Doing some of the work yourself will also cut labor costs.

  • Save Money and Time by Using a Realtor

Once the home is fixed-up, and if you plan to sell the house (vs. keeping it as a buy-and-hold property), studies show if you use a reputable real estate agent, your property will sell quicker than selling without one. The longer you hold on to the property, the more holding cost you incur. Realtors know plenty of possible buyers and having them list your house on the MLS helps sell your property more quickly. While they are selling your house, you can spend your time looking for your next deal.

Overall, utilizing these few basic tips will help you in the process of doing a fix-and-flip. All it takes to be success is having the right attitude and information. And getting out there and doing it.

Knowledge + Action = Results