December 27, 2022

I hope you all had a great Christmas / Chanukah weekend, and here we sit, ready to jump into another year.

We have all set our goals, and our business plans are also set! Now we wait for the clock to tick, and boom, things will take off! Yup that is my positive thinking at it’s best, but I want to go a little deeper. The 4th quarter was tough on many of us, and the first quarter looks pretty much the same. Some of us are more stressed out than others, some have more bills than others, and we are no longer on cruise control. There is nothing you can do about that now as the market has shifted quickly, and we can try to increase our market share to make up for it, but what can we put in our business plan for 2023 that will help us through the rough times in the future?

Invest in your future! We must put money away when time are busy! Not just for taxes but for the slower times, and the last quarter was a great example of everything going well, and then a bomb hit, and nothing happened after that!

You can put $20,500.00 in a 401K this year and $22,500.00 in 2023. If you have that money sitting around and don’t want to be taxed on it this year, then put that amount in a 401K! Do it religiously at every closing! You won’t feel it at the end of the year! You can put in an additional $6500.00 this year and $7500.00 in 2023 if you are over 50 years old!

Let’s say that you put money in your 401K religiously for the past five years, and you have 100K in there now.
You would have paid less in taxes and could borrow 50% of the account balance to get you through the rough times.
If you had that money in the 401k account and wanted to buy another property, you could feasibly use the same borrowed money for the down on a new house.
Remember you are deferring taxes until you pull the money out. When you borrow money against the 401K, it does not create a taxable event. If you earned $200,000.00 as a single person in 2022, you would pay about 41% of your last dollar. If you put $20,000.00 in your 401K, you would avoid $8200.00 in taxes. Then you may be able to borrow $10,000.00 from the $20,000.00 you put in your account.

So for the final math –
You can pay taxes on $20,000.00 and walk with $10,600.00. OR
You can put $20,000.00 in a 401K, delay the tax and borrow against the money at some point and get as much as $10,000.00 back and you will still have $10,000.00 in the 401K earning interest or stock…

I hope you see why investing is essential. Remember that rich people invest the money they make and have a plan. The middle class earns money to live, and poor people earn money to pay bills. We all want to be on easy street, but this year has been challenging! If we learned anything, we learned that savings and investments will help us through our rocky real estate road!

Interest rates are still struggling and definitely off their lows. Let’s hope for a Christmas miracle and that the Christmas miracle is delayed, just like so many flights.

1. 30-year Government Loans (FHA / VA) is in the 5’s.
2. Conventional Loans up to $726,200.00 - in the high 5’s, and low 6’s.
3. High Balance Loans $726,201.00-$ 1,089,300.00 are in the high 5’s and low to mid 6’s
4. Jumbo loans above $1,089,300 are in the low 6’s
5. 5/1, 7/1, 10/1 Arms are in the 5’s
6. Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
7. Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the 8’s.
8. 0 down loans are in the high 7’s to low 8’s- 620 credit score min right now! Mid 6’s, for the most part, up to $725,000.00.
9. Private Money lenders - hard Money Loans – 35% down!
10. No Ratio Loans 30% down
11. Debt Service Coverage loans with as little as 25% down
12. Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

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

I will be around all week if you have any questions or if someone interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!