2/29/24 - Move up and sell or move up and hold?

2/29/24 – Move up and sell or move up and hold?

I was talking with a client yesterday, and he was debating between keeping a property as an investment or selling it and having a lower payment on his new house. I thought I would share a modified version of what I sent him.

It was nice speaking with you about purchasing a property. Per our conversation, below are some numbers based on today’s interest rates:

Purchase and keep your property as an investment! We will pull out 10% down from your current property, which will run you about $825 per month to allow you to purchase with the following payments:

10% Down Payment –

$950,000.00 Price – 30-year fixed rate – Principal and Interest payment = $5682.60 + Property Taxes $990.00 + Insurance $400.00 + PMI $135 = $7207.60 + HOA

If you sell and purchase, you will have the following payments, assuming you net $400,000.00:

$400,000.00 Down Payment

$950,000.00 Price – 30-year fixed rate – Principal and Interest payment = $3567.29 + Property Taxes $990.00 + Insurance $400.00 = $4957.29 + HOA

Interest rates are trending downward, and most buyers are looking to buy now before prices increase further. When rates do go down, you can expect the following savings when you refinance:

When rates drop by 1%, and you refinance, your monthly payment will drop by $350 – $565

When rates drop by 2%, and you refinance, your monthly payment will drop by $665 – $1000

When rates drop by 3%, and you refinance, your monthly payment will drop by $950 – $1455

In the $950,000 scenario with 10% down, you are paying off $8701 in the first year of ownership, which will increase annually. You can also write off about $52,400 in interest on your taxes, which will likely put an additional $12,576.00 back in your pocket from your tax return at the end of the year. Check with your accountant to confirm. Property values have increased by about 5.6% on average over the past 70 years, and if property values go up by just 4% per year, then the above property will increase by $38,000.00 each year. So if all of the above holds, your payment will be $7207.00 – you will pay off $725, you will receive $1063.00 as a monthly tax refund, and your appreciation will be $3166.00 monthly. If all holds, the true cost of buying the above property is $2253.00 monthly.

In the $950,000 scenario with $400,000 down, you are paying off $5861 in the first year of ownership, which will increase annually. You can also write off about $36945 in interest on your taxes, which will likely put an additional $8867.00 back in your pocket from your tax return at the end of the year. Check with your accountant to confirm. Property values have increased by about 5.6% on average over the past 70 years, and if property values go up by just 4% per year, then the above property will increase by $38,000.00 each year. So if all of the above holds, your payment will be $4957 – you will pay off $488, you will receive $738.00 as a monthly tax refund, and your appreciation will be $3166.00 monthly. If all holds, the true cost of buying the above property is $565.00 monthly.

One last thing I want to share is that the property you want to keep will have about a $430,000.00 balance if you keep it, and your payment will be about $3000 on a property you can lease for approximately $3500. The property value will rise by $30,000, assuming that the property increases in value by 4% annually. You will pay off about $11,000.00 on your two mortgages annually, and rents should increase between 3-5% annually.

If you sell and buy, you will save $2300.00 monthly in the short term. If you keep that property as an investment, you will likely receive long-term wealth.

Rental property worth $750,000 today – with 4% annual appreciation, your value will be $915,000 in 5 years, $1,118,000 in 10 years, and $1,667,000 in 20 years.

Assuming you rent the property today for $3500.00. With a 3% annual rent increase, your rent will be $4065 in 5 years, $4722 in 10 years, and $6372 in 20 years.

The story’s moral is that clients who can afford rental properties should buy them! Clients who can’t afford to pay an extra $2300 a month should not keep that property as an investment. The long-term effects on your net worth are obvious, but you have to be able to handle the short-term. This is another way to overcome a seller’s resistance to selling a house with a low mortgage rate.

Starting today, I am now doing a double sign-off, lol!

I am available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

But wait, there's more!

Condo / Townhome – issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!
American Beauty Village West: Reserves
Bouquet Canyon Village – Insurance – On Fannie’s list!
Bridgewater, Emeryville - On Fannie’s list!
Brookside Walk – Insurance –
Cabrini Villas, Burbank - On Fannie’s list!
Canyon Oaks – Insurance On Fannie’s list!
Casa Marabella – 13951 Sherman Way, Van Nuys -On Fannie’s list!
Cornerstone – Insurance -On Fannie’s list!
Encino Oaks – 5460 White Oak Ave – On Fannie’s list!
Liberty Canyon HOA – 27409 Country Glen Road, Agoura Hills, CA- On Fannie’s list!
Mariposa: Insurance On Fannie’s list!
Penn Court HOA – 4201 Pennsylvania Ave La Crescenta On Fannie’s list!
Rainbow Sierra Terrace – Underinsured and voting on Insurance in March!
Scenic Hills – Insurance – On Fannie’s list!
Shadow Ridge – Oak Park – Insurance -On Fannie’s list!
Sherman Way Condos – 17900 Sherman Way Reseda – On Fannie’s list!
Sierra Glen Condos – Insurance – On Fannie’s list!
The District Community Association – 19533 Cardigan Dr, Northridge – On Fannie’s list!
The Met at Warner Center, Woodland Hills - On Fannie’s list!
Treana – Stevenson Ranch: *** NEW 2/13/2024*** On Fannie’s list!
Valle Di Oro – *** NEW 2/14/2024*** On Fannie’s list!
Walnut Gardens II – 7320 Lennox Ave Van Nuys CA – On Fannie’s list!
Warner Center Condos – 5515 Canoga Ave, Woodland Hills, CA On Fannie’s list!
West Creek Condos and Townhomes: Insurance On Fannie’s List!

Please let me know if you hear anything new on condos or townhouses.

Interest rates have been better this week, but there is nothing to write home about. We have some momentum, but we need the economic data to speak before we can scream, “Rates are going down!”

12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
We do loans in all states, so call me with anything you need.
Government Loans (FHA / VA) are in the high 5’s and low 6’s
Conventional Loans up to $765,550.00 are in the low to mid 6’s
High Balance Loans $765,550.00-$ 1,148,325.00 are in the mid to high 6’s
Jumbo loans above $1,148,325 are in 6’s
Bank statement loans - They are available with 10% down again! 6’s to 9’s depending on down and credit score.
No income qualifier – 40% down with reserves! In the 8’s!
0 down loans are in the high 7’s – 660 credit score min right now, up to $793,000.00.
Private Money lenders - Hard Money Loans – 35% down!
No Ratio Loans 30% down
Debt Service Coverage loans with as little as 25% down
Bridge Loans - typically 7.49% with limited fees – and they get you where you need to go!
0 down California Dream for all Equity Share – Postponed until April 2024??? Ya better hurry and get started!
3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! The above are LA County Loan Limits.

My direct line at the office has been down for three weeks, and it will supposedly be back on Tuesday, March 5th! LOL!

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!

Mike Meena President | Loan Officer

Click to Call or Text:

(661) 714-6258

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